FORM    10-K

x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT    OF 1934

For the Fiscal Year Ended October 31, 2004

 OR

o            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE    ACT OF 1934

Commission    File No. 0-21084

CHAMPION    INDUSTRIES, INC.

(Exact    name of registrant as specified in its charter)
|   |   |   | West Virginia                                                         |   | 55-0717455                           |
|--------|--------|--------|-----------------------------------------------------------------------|--------|--------------------------------------|
|   |   |   |                                                                       |   |                                      |
|   |   |   | (State or other jurisdiction of incorporation        or organization) |   | (I.R.S. Employer Identification No.) |
|   |   |   |                                                                  |   |                                 |
|   |   |   | 2450 First Avenue                                                     |   |                                 |
|   |   |   | P.O. Box 2968                                                         |   |                                 |
|   |   |   | Huntington, West Virginia                                             |   | 25728                                |
|   |   |   |                                                                       |   |                                      |
|   |   |   | (Address of Principal Executive Offices)                              |   | (Zip Code)                           |

Registrant's telephone number, including    area code:  (304) 528‐2700

Securities registered pursuant to Section    12(b) of Act: None

Securities registered pursuant to Section    12(g) of Act: Common Stock, $1.00 par value

Indicate by check mark whether the registrant    (1) has filed all reports required to be filed by Section 13 or 15(d) of the    Securities Exchange Act of 1934 during the preceding 12 months (or 

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for such shorter period that the registrant was required    to file such reports) and (2) has been subject to such filing requirements    for the past 90 days.
|   | Yes    o                  No   x |
|--------|-------------------------------------------------------------------------------------------------------------|

Indicate by check mark if the disclosure    of delinquent filers pursuant to Item 405 of Regulation S-K is not contained    herein and will not be contained, to the best of registrant's knowledge, in    definitive proxy or information statements incorporated by reference in Part    III of this Form 10-K or any amendment to this Form 10-K.        
|   | o   |
|--------|---------------|

Indicate by check mark whether the registrant    is an accelerated filer (as defined in Rule 12b-2 of the Act).
|   | Yes    o                  No   x |
|--------|-------------------------------------------------------------------------------------------------------------|

The aggregate    market value of the voting stock of the registrant held by non‐affiliates    as of January 7, 2005, was $16,879,748 of Common Stock, $1.00 par value. The    outstanding common stock of the Registrant at the close of business on January    7, 2005 consisted of 9,733,913 shares of Common Stock,  $1.00 par value.

Total number of pages including cover page 130.

DOCUMENTS INCORPORATED BY REFERENCE: Portions    of the registration statement on Form S‐2/A No. 333‐47585, filed    on March 16, 1998, are incorporated by reference into Part IV, Item 15.     Portions of the Registrant’s definitive proxy statement dated February    18, 2005 with respect to its Annual Meeting of Shareholders to be held on    March 21, 2005 are incorporated by reference into Part III, Items 10-13.     Exhibit Index located in Part IV Item 15.

##### **SPECIAL    NOTE REGARDING FORWARD-LOOKING STATEMENTS**

           Certain    statements contained in this Annual Report or in documents incorporated herein    by reference, including without limitation statements including the word “believes,”    “anticipates,” “intends,” “expects” or    words of similar import, constitute “forward-looking statements”    within the meaning of section 21E of the Securities Exchange Act of 1934,    as amended (the “Exchange Act”). Such forward-looking statements    involve known and unknown risks, uncertainties and other factors that may    cause the actual results, performance or achievements of the Company to be    materially different from any future results, performance or achievements    of the Company expressed or implied by such forward-looking statements.     Such factors include, among others, general economic and business conditions,    changes in business strategy or development plans, and other factors referenced    in this Annual Report, including without limitations under the captions “Management’s    Discussion and Analysis of Financial Condition and Results of Operations,”    and “Business.”  Given these uncertainties, prospective investors    are cautioned not to place undue reliance on such forward-looking statements.     The Company disclaims any obligation to update any such factors or to publicly    announce the results of any revisions to any of the forward-looking statements    contained herein to reflect future events or developments.

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**PART    I**

**ITEM    1 - BUSINESS**

**HISTORY**

           Champion    Industries, Inc. (“Champion” or the “Company”) is    a major commercial printer, business forms manufacturer and office products    and office furniture supplier in regional markets east of the Mississippi    River. The Company's sales offices and production facilities are located in    Huntington, Charleston, Parkersburg, Clarksburg, Wheeling and Morgantown,    West Virginia; Lexington and Owensboro, Kentucky; Baton Rouge and New Orleans,    Louisiana; Cincinnati, Ohio; Jackson, Mississippi; Kingsport and Knoxville,    Tennessee; Evansville, Indiana; Bridgeville and Altoona, Pennsylvania; and    Asheville, North Carolina. The Company's sales force of approximately 140    salespeople sells printing services, business forms management services, office    products and office furniture.

           The    Company was chartered as a West Virginia corporation on July 1, 1992. Prior    to the public offering of the Company's Common Stock on January 28, 1993 (the    “Offering”), the Company's business was operated by The Harrah    and Reynolds Corporation (“Harrah and Reynolds”), doing business    as Chapman Printing Company, together with its wholly‐owned subsidiaries,    The Chapman Printing Company, Inc. and Stationers, Inc. Incident to the Offering,    Harrah and Reynolds and the Company entered into an Exchange Agreement, pursuant    to which, upon the closing date of the Offering: (i) Harrah and Reynolds contributed    to the Company substantially all of the operating assets of its printing division,    including all inventory and equipment (but excluding any real estate and vehicles)    and all issued and outstanding capital stock of its subsidiaries, The Chapman    Printing Company, Inc. and Stationers, Inc.; (ii) the Company assumed certain    of the liabilities relating to the operations of the printing divisions of    Harrah and Reynolds and its subsidiaries, The Chapman Printing Company, Inc.    and Stationers, Inc., excluding debts associated with real estate, certain    accounts payable to affiliates and certain other liabilities; and (iii) Harrah    and Reynolds was issued 2,000,000 shares of Common Stock of the Company.

           The    Company and its predecessors have been headquartered in Huntington since 1922.    Full scale printing facilities, including web presses for manufacturing business    forms, and sales and customer service operations are located in Huntington.    The Company's Charleston division was established in 1974 through the acquisition    of the printing operations of Rose City Press. Sales and customer service    operations, as well as the pre‐press departments, are located in Charleston.    The Parkersburg division opened in 1977 and was expanded by the acquisitions    of Park Press and McGlothlin Printing Company. In addition to sales and customer    service operations, this division houses a large full‐color printing    facility and a state‐of‐the‐art studio, with scanners, electronic    color retouching equipment and 4-, 5- and 6-color presses.

           The    Lexington division commenced operations in 1983 upon the acquisition of the    Transylvania Company. This location includes a pre‐press department,    computerized composition facilities, as well as sales and customer service    operations.

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           The    Company acquired Stationers, Inc. (“Stationers”), an office product,    office furniture and retail bookstore operation located in Huntington, in    1987 and consolidated its own office products and office furniture operations    with Stationers. On August 30, 1991, Stationers, Inc. sold the assets, primarily    inventory and fixtures, of its retail bookstore operation. In July 1993, Stationers    expanded through acquisition and began operations in Marietta, Ohio, under    the name “Garrison Brewer.”  The Company’s Garrison    Brewer operation was relocated across the Ohio river to the nearby Chapman    Printing Parkersburg location in 2002.

           The    Bourque Printing division (“Bourque”) commenced operations in    June, 1993, upon the acquisition of Bourque Printing, Inc. in Baton Rouge,    Louisiana. This location includes a pre‐press department, computerized    composition facilities, a pressroom with up to 4‐color presses and a    bindery department, as well as sales and customer service operations. Bourque    was expanded through the acquisition of Strother Forms/Printing in Baton Rouge    in 1993, through the acquisition of the assets of E. S. Upton Printing Company,    Inc. in New Orleans in 1996 and through the acquisition of Transdata Systems,    Inc. in Baton Rouge and New Orleans in 2001.

           The    Dallas Printing division (“Dallas” or “Champion Jackson”)    commenced operations in September, 1993, upon the acquisition of Dallas Printing    Company, Inc. in Jackson, Mississippi. This location includes a pre‐press    department, computerized composition facilities, as well as sales and customer    service operations.

           On    November 2, 1993, a wholly‐owned subsidiary of the Company chartered    to effect such acquisition purchased selected assets of Tri‐Star Printing,    Inc., a Delaware corporation doing business as “Carolina Cut Sheets”in the manufacture and    sale of business forms in Timmonsville, South Carolina. The Company's subsidiary    has changed its name to “Carolina Cut Sheets, Inc.” Carolina Cut    Sheets manufactures single‐part business forms for sale to dealers and    through the Company's other divisions. Carolina Cut Sheets was relocated to    Huntington, West Virginia in 2001.

           On    February 25, 1994, Bourque acquired certain assets of Spectrum Press Inc.    (“Spectrum”), a commercial printer located in Baton Rouge, Louisiana.    

           On    June 1, 1994, the Company acquired certain assets of Premier Data Graphics,    a distributor of business forms and data supplies located in Clarksburg, West    Virginia.

           On    August 30, 1994, Dallas acquired certain assets of Premier Printing Company,    Inc. (“Premier Printing”) of Jackson, Mississippi.

           On    June 1, 1995, in exchange for issuance of 52,383 shares of its common stock,    the Company acquired U.S. Tag & Ticket Company, Inc. (“U.S. Tag”),    a Baltimore, Maryland based manufacturer of tags used in the manufacturing,    shipping, postal, airline and cruise industries. The operations of U.S. Tag    were moved to Huntington, West Virginia in August 2003 and they were consolidated    into an existing facility.

           On    November 13, 1995, in exchange for $950,000 cash and the issuance of 66,768    shares of its common stock, the Company acquired Donihe Graphics, Inc. (“Donihe”),    a high‐volume color printer based in Kingsport, Tennessee.

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           On    February 2, 1996, Bourque purchased various assets and assumed certain liabilities    of E.S. Upton Printing Company, Inc. (“Upton”) for approximately    $750,000 in cash. 

           On    July 1, 1996, the Company acquired Smith & Butterfield Co., Inc. (“Smith    & Butterfield”), an office products company located in Evansville,    Indiana and Owensboro, Kentucky. Smith & Butterfield is operated as a    division of Stationers, Inc. The Company issued 66,666 shares of common stock    valued at $1,200,000 in exchange for all of the issued and outstanding shares    of common stock of Smith & Butterfield.

           On    August 21, 1996, the Company purchased the assets of The Merten Company (“Merten”),    a commercial printer headquartered in Cincinnati, Ohio, for cash and assumption    of liabilities aggregating $2,535,295.

           On    December 31, 1996, the Company acquired all outstanding capital stock of Interform    Corporation (“Interform”), a business form manufacturer in Bridgeville,    Pennsylvania, for $2,500,000 in cash which was financed by a bank.

           On    May 21, 1997, the Company acquired all outstanding common shares of Blue Ridge    Printing Co., Inc. of Asheville, North Carolina and Knoxville, Tennessee (“Blue    Ridge”) in exchange for 277,775 shares of the Company's common stock.     

           On    February 2, 1998, the Company acquired all outstanding common shares of Rose    City Press (“Rose City”) of Charleston, West Virginia, in exchange    for 75,722 shares of the Company’s common stock valued at $1,250,000.    

           On    May 18, 1998, the Company acquired all outstanding common shares of Capitol    Business Equipment, Inc. (“Capitol”), doing business as Capitol    Business Interiors, of Charleston, West Virginia, in exchange for 72,202 shares    of the Company’s common stock valued at $1,000,000.  

           On    May 29, 1998, the Company acquired all outstanding common shares of Thompson’s    of Morgantown, Inc. and Thompson’s of Barbour County, Inc. (collectively,    “Thompson’s” or “Champion Morgantown”) of Morgantown,    West Virginia, in exchange for 45,473 shares of the Company’s common    stock valued at $600,000. 

           Rose    City, Capitol and Thompson’s are operated as divisions of Stationers.

           On    June 1, 1999, the Company acquired all of the issued and outstanding common    stock of Independent Printing Service, Inc. (“IPS”) of Evansville,    Indiana. IPS is operated as a division of Smith & Butterfield. 

           On    July 16, 1999, the Company’s Blue Ridge subsidiary acquired certain    assets and assumed certain liabilities of AIM Printing (“AIM”)    of Knoxville, Tennessee.  

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           On      November 30, 1999, the Company acquired all of the issued and outstanding      common stock of Diez Business Machines (“Diez”) of Gonzales,      Louisiana. Diez was operated as a subsidiary of Stationers until 2004 when      it was relocated to the Bourque facility.

           On      November 6, 2000, the Company acquired certain assets of the Huntington,      West Virginia paper distribution division of the Cincinnati Cordage Paper      Company (“Cordage”). On April 30, 2001, the Company entered      into a strategic alliance with Xpedx resulting in the assumption by Xpedx      of the Cordage customer list and the sale of certain inventory items.

           On      October 10, 2001, the Company acquired Transdata Systems, Inc. (“Transdata”)      of Baton Rouge and New Orleans, Louisiana. 

           On      June 18, 2003, the Company acquired certain assets of Contract Business      Interiors (CBI) of Wheeling, West Virginia pursuant to acceptance by the      U.S. Bankruptcy Court for the Northern District of West Virginia. As a result      of this transaction, the Company also assumed certain customer deposit liabilities      in the ordinary course of business.

           On      July 1, 2003, the Company acquired certain assets of Pittsburgh based Integrated      Marketing Solutions, the direct sales division and distributorship of Datatel      Resources Corporation.

           On      May 13, 2004, the Company acquired certain assets of Cincinnati, Ohio Westerman      Print Company “Westerman”. The assets of Westerman were moved      to the Company’s Merten operation in Cincinnati, Ohio.

           On      September 7, 2004, the Company acquired all the issued and outstanding capital      stock of Syscan Corporation (“Syscan”), a West Virginia corporation,      for a gross cash price of $3,500,000 and a contingent purchase price, dependent      upon satisfaction of certain conditions, not to exceed the amount of $1,500,000.      After considering the cash received in the transaction, the acquisition      of a building and acquisition costs the net assets acquired totaled approximately      $2,688,000.

           All      acquisitions have been accounted for using the purchase method of accounting      except for U.S. Tag, Blue Ridge, Capitol and Thompson’s, which utilized      the “pooling-of-interest” method of accounting.

**BUSINESS**

           Champion      is engaged in the commercial printing and office products and furniture      supply business in regional markets east of the Mississippi River.       The Company's sales force sells a full range of printing services, business      forms, office products and office furniture. Management views these sales      activities as complementary since frequent customer sales calls required      for one of its products or services provide opportunities to cross‐sell      other products and services.  The Company believes it benefits from      significant customer loyalty and customer referrals because it provides      personal service, quality products, convenience and selection with one‐stop      shopping.

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           The      Company's printing services range from the simplest to the most complex      jobs, including business cards, books, tags, brochures, posters, 4- to 6-color      process printing and multi‐part, continuous and snap‐out business      forms. The Company's state‐of‐the‐art equipment enables      it to provide computerized composition, art design, paste‐up, stripping,      film assembly and color scanner separations. Included within our print segment      are fulfillment services to our customers which encompass warehousing, distribution,      and reporting services. The Company also offers complete bindery and letterpress      services. The printing operations contributed $95.3 million, $96.5 million      and $95.2 million or 76.6%, 79.0% and 77.5% of the Company's total revenues      for the fiscal years ended October 31, 2004, 2003 and 2002.

           The      Company provides a full range of office products and office furniture primarily      in the budget and middle price ranges, and also offers office design services.      The Company publishes a catalog of high volume, frequently ordered items      purchased directly from manufacturers. These catalog sales account for the      bulk of sales volume and afford sales personnel flexibility in product selection      and pricing. Medium to large volume customers are offered levels of pricing      discounts. In addition, the Company offers a broad line of general office      products through major wholesalers' national catalogs. The Company has implemented      Internet e-commerce sites, which allow customers to order office products,      furniture and forms online. The e-commerce sites include the office products      and office furniture catalog, which is customized specifically for each      customer requesting Internet e-commerce access. In addition, the Company      offers customized on-line forms management solutions through www.cgc1.com.      The Company believes that its e-commerce sites will allow customers to access      data concerning their company’s purchase habits so as to better control      expenditures for office products and business forms and eliminate large      in-house inventories. The Company is a member of a major office products      purchasing organization. Members benefit from volume discounts, which permit      them to offer competitive prices and improve margins. The Company's office      furniture business focuses on the budget to middle price range lines, although      upscale lines are offered as well. Office products, office furniture and      office design operations contributed $29.1 million, $25.6 million and $27.7      million, or 23.4%, 21.0% and 22.5% of the Company's total revenues for the      fiscal years ended October 31, 2004, 2003 and 2002.

###### **ORGANIZATION**

           Champion’s      two lines of business are comprised of nineteen operating divisions. The      Huntington headquarters provides centralized financial management and administrative      services to each of its two business segments.

Commercial Printing

           Ten      commercial printing divisions are located in Huntington, Charleston and      Parkersburg, West Virginia; Lexington, Kentucky; Baton Rouge and New Orleans,      Louisiana; Jackson, Mississippi; Cincinnati, Ohio; Kingsport, Tennessee;      and Asheville, North Carolina.  Each has a sales force, a customer      service operation and a pre‐press department that serve the customers      in their respective geographic areas. Although each customer's interface      is solely with its local division's personnel, its printing job may be produced      in another division using the equipment most suited to the quality and volume      requirements of the job. In this way, for example, Champion can effectively      compete for high quality process color jobs in Lexington by selling in Lexington,      printing in Cincinnati and binding in Huntington. The full range of printing      resources is available to customers in the entire market area without Champion      having to duplicate equipment in each area.

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           Interform      Corporation, doing business as Interform Solutions and located in Bridgeville,      Pennsylvania, manufactures business forms and related products, which it      sells through a network of independent distributors concentrated in Eastern      Pennsylvania, New Jersey and metropolitan New York. 

           Consolidated      Graphic Communications division in Bridgeville, Pennsylvania operates as      a full line printing and printing services distributor.  The division      offers complete print management, fulfillment services and B2B e-commerce      solutions.

           Carolina      Cut Sheets, Inc., located in Huntington, West Virginia, manufactures single      sheet business forms which are sold to other commercial printers and dealers      and through the Company's other divisions.

           The      Huntington, West Virginia division of Chapman Printing Company manufactures      single sheet and multi‐part, snap‐out and continuous business      forms for sale through many of the Company's commercial printing divisions.

           U.S.      Tag, located in Huntington, West Virginia, manufactures and sells tags used      in the manufacturing, shipping, postal, airline and cruise industries throughout      the United States through dealers and the Company's other divisions. 

           Transdata,      located in Baton Rouge and New Orleans, Louisiana, operates as a subsidiary      of Bourque Printing performing sales and customer service functions including      fulfillment services and operates out of the Upton and Bourque facilities.

           Syscan      headquartered in Charleston, West Virginia operates as a full line printing,      printing services distributor and office products and office furniture distributor.      Syscan offers complete print management, fulfillment, mail, digital print,      office furniture and print and office products B2B e-commerce solutions.

Office Products, Office Furniture and Office Design

           Stationers,      located in Huntington, Clarksburg (doing business as “Champion Clarksburg”),      Morgantown (through its Champion Morgantown division) and Parkersburg, West      Virginia (doing business as “Garrison Brewer”), provides office      products and office furniture primarily to customers in the Company's West      Virginia, Ohio and Kentucky market areas. Products are sold by printing      division salespeople and delivered in bulk daily to each division, or shipped      directly to customers.  

           Smith      & Butterfield, located in Evansville, Indiana and Owensboro, Kentucky,      provides office products and office furniture primarily to customers in      the Company's Indiana and Kentucky market areas. Products are sold by Smith      & Butterfield sales personnel and delivered to customers daily.

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```
 
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           Stationers,      through its Capitol division, offers office design services throughout West      Virginia and eastern Kentucky.

           Champion      Jackson located in Jackson, Mississippi functions as both a printing sales      headquarters with full digital prepress and an office products sales center.

###### **PRODUCTS      AND SERVICES**

Printing Services

           Champion's      primary business is commercial printing and business forms manufacturing.      The Company, unlike most of its regional competitors, offers the full range      of printing production processes, enabling the Company to provide customers      a one‐stop, one‐vendor source without the time and service constraints      of subcontracting one or more aspects of production. Major production areas      include: (i) printing of business cards, letterhead, envelopes, and one,      two, or three color brochures; (ii) process color manufacturing of brochures,      posters, advertising sheets and catalogues; (iii) die cutting and foil stamping;      (iv) bindery services, including trimming, collating, folding and stitching      the final product; (v) forms printing, encompassing roll‐to‐roll      computer forms, checks, invoices, purchase orders and similar forms in single‐part,      multi‐part, continuous and snap‐out formats; (vi) tag manufacturing;      and (vii) high volume process color webprinting of brochures and catalogs.      The capabilities of the Company's various printing divisions are stated      below.
| Division                                                    |   | Sales & Customer Service |   | Pre-Press |   | Sheet Printing | Rotary Printing |   | Full Color |   | High Volume Full Color |   |
|-------------------------------------------------------------|--------|------------------------------|--------|-----------|--------|----------------|-----------------|--------|------------|--------|------------------------|--------|
|                                                             |   |                              |   |           |   |                |                 |   |            |   |                        |   |
| Huntington                                                  |   | *                            |   | *         |   | *              | *               |   |       |   |                   |   |
| Charleston                                                  |   | *                            |   | *         |   |           |            |   |       |   |                   |   |
| Parkersburg                                                 |   | *                            |   | *         |   | *              |            |   | *          |   |                   |   |
| Lexington                                                   |   | *                            |   | *         |   |           |            |   |       |   |                   |   |
| Bourque Printing, Inc.                                      |   | *                            |   | *         |   | *              |            |   | *          |   |                   |   |
| Dallas Printing Company, Inc. (Champion            Jackson) |   | *                            |   | *         |   |           |            |   |       |   |                   |   |
| Carolina Cut Sheets, Inc.                                   |   | *                            |   |      |   |           |            |   |       |   |                   |   |
| U.S. Tag & Ticket Company, Inc.                         |   | *                            |   | *         |   |           |            |   |       |   |                   |   |
| Donihe Graphics, Inc.                                       |   | *                            |   | *         |   | *              | *               |   | *          |   | *                      |   |
| Upton Printing                                              |   | *                            |        | *         |        | *              |                 |        | *          |        |                        |   |
| The Merten Company                                          |   | *                            |        | *         |        | *              |                 |        | *          |        |                        |   |
| Interform Corporation                                       |   | *                            |   | *         |   |           | *               |   | *          |        |                        |   |
| Consolidated Graphic Communications                         |   | *                            |        | *         |        |                |                 |        |            |        |                        |   |
| Blue Ridge Printing Co., Inc.                               |   | *                            |        | *         |        | *              |                 |        | *          |        |                        |   |
| Transdata                                                   |   | *                            |        |           |        |                |                 |        |            |        |                        |   |
| Syscan                                                      |   | *                            |        | *         |        | *              |                 |        |            |        |                        | j      |

*- Services Provided

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Office Products,      Office Furniture and Office Design

           Champion      provides its customers with a wide range of product offerings in two major      categories: supplies, such as file folders, paper products, pens and pencils,      computer paper and laser cartridges; and furniture, including budget and      middle price range desks, chairs, file cabinets and computer furniture.      Office supplies are sold primarily by Company salespeople through the Company's      own catalogs. Office furniture is primarily sold from catalogs and supplied      from in‐house stock.  Special orders constitute a small portion      of sales. The Capitol division of Stationers provides interior design services      to commercial customers. The design services include space planning, purchasing      and installation of office furniture, and management of design projects.

###### **MANUFACTURING      AND DISTRIBUTION**

           The      Company's pre‐press facilities have desktop publishing, typesetting,      laser imagesetting and scanning/retouching equipment, and complete layout,      design, stripping and plate processing operations. Sheet printing equipment      (for printing onto pre‐cut, individual sheets) includes single color      duplicators, single to six color presses and envelope presses. Rotary equipment      (for printing onto continuous rolls of paper) includes multi‐color      business form web presses, carbon and multi‐part collators, and a      high-speed 5‐color half‐web press. 

           Binding      equipment consists of hot‐foil, embossing and die cutting equipment,      perforators, folders, folder‐gluers, scoring machines, collator/stitcher/      trimmers for saddle stitching, automatic and manual perfect binders, numbering      machines and mailing equipment.

           Each      of the Company's offices is linked with overnight distribution of products      and on‐line electronic telecommunications permitting timely transfer      of various production work from facility to facility as required. While      the Company maintains a fleet of delivery vehicles for intracompany and      customer deliveries, it utilizes the most cost effective and expeditious      means of delivery, including common carriers.

           Requirements      for the Company's press runs are determined shortly before the runs are      made and, therefore, backlog is not a meaningful measure in connection with      the Company's printing business.

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           The      Company's inventory goal is to have approximately 85% of the office product      items the Company sells in stock.  Another 12% are ordered on a daily      basis and received overnight. The remaining 3% are items that come direct      from manufacturers and may take one week or more from placement of order      to delivery to customer. Office furniture sales for mid-line and budget      are made primarily from the Company's in‐house stock. However, special      orders from manufacturers and project furniture may require 30 to 90 days      for delivery.

###### **CUSTOMERS**

           The      Company believes that its reputation for quality, service, convenience and      selection allows it to enjoy significant loyalty from its customers.       Champion's marketing strategy is to focus on manufacturers, institutions,      financial services companies and professional firms. Consistent with customary      practice in the commercial printing and office products industries, the      Company ordinarily does not have long‐term contracts with its customers,      although a number of high volume customers issue yearly purchase orders.      These purchase orders, which are typically for office products but may include      printing services, are for firm prices adjustable for paper price changes.      Depending upon customer satisfaction with price and service, these purchase      orders may be renewed for another year or up to three years without repeating      the full bidding process.

           During      the fiscal years ended October 31, 2004, 2003 and 2002, no single customer      accounted for more than 2% of the Company’s total revenues. Due to      the project‐oriented nature of customers' printing requirements, sales      to particular customers may vary significantly from year to year depending      upon the number and size of their projects.

###### **SUPPLIERS**

           The      Company has not experienced difficulties in obtaining materials in the past      and does not consider itself dependent on any particular supplier for supplies.      The Company has negotiated company‐wide paper purchasing agreements      directly with paper manufacturers and is a member of a major office products      buying group, which management believes provides the Company with a competitive      advantage.  

###### **COMPETITION**

           The      markets for the Company's printing services and office products are highly      competitive, with success based primarily on price, quality, production      capability, capacity for prompt delivery and personal service. 

           Champion's      printing competitors are numerous and range in size from very large national      companies with substantially greater resources than the Company to many      smaller local companies. In recent years, despite consolidation within the      printing industry, there has been a substantial increase in technological      advances in new equipment, resulting in excess capacity and highly competitive      pricing. The Company has remained competitive by maintaining its printing      equipment at state‐of‐the‐art levels and emphasizing personal      attention to customers.

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           Large      national and regional mail order discount operations provide significant      competition in the office products and office furniture business. The economies      afforded by membership in a national purchasing association and by purchasing      directly from manufacturers, and the high level of personal services to      customers, contribute substantially to the Company's ability to compete      in the office supply and office furniture market segments.

###### **ENVIRONMENTAL      REGULATION**

           The      Company is subject to the environmental laws and regulations of the United      States and the states in which it operates concerning emissions into the      air, discharges into waterways and the generation, handling and disposal      of waste materials. The Company's past expenditures relating to environmental      compliance have not had a material effect on the Company and are included      in normal operating expenses. These laws and regulations are constantly      evolving, and it is impossible to predict accurately the effect they may      have upon the capital expenditures, earnings and competitive position of      the Company in the future. Based upon information currently available, management      believes that expenditures relating to environmental compliance will not      have a material impact on the financial position of the Company.

###### **GEOGRAPHIC      CONCENTRATION AND ECONOMIC CONDITIONS**

           The      Company's operations and the majority of its customers are located in the      United States of America, east of the Mississippi River. The Company and      its profitability may be more susceptible to the effects of unfavorable      or adverse local or regional economic factors and conditions than a company      with a more geographically diverse customer base.

###### **SEASONALITY**

           Historically,      the Company has experienced a greater portion of its profitability in the      second and fourth quarters than in the first and third quarters. The second      quarter generally reflects increased orders for printing of corporate annual      reports and proxy statements. A post‐Labor Day increase in demand      for printing services and office products coincides with the Company's fourth      quarter.

###### **EMPLOYEES**

           On      October 31, 2004, the Company had approximately 830 employees.

           The      Company's subsidiary, Interform Corporation, is party to a collective bargaining      agreement with the United Steelworkers of America, AFL‐CIO‐CLC      on behalf of its Local Union 8263 covering all production and maintenance      employees (totaling 78 employees at October 31, 2004) at its Bridgeville,      Pennsylvania facility.  This contract expires May 31, 2006.  The      Company believes relations with the union and covered employees are good.      

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**EXECUTIVE OFFICERS      OF CHAMPION**
|                                   |    | **Position and offices with Champion;**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------------------------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Name     ** | **Age** | **Principal occupation or          employment last five years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Marshall T. Reynolds                   | 68      | Chief Executive Officer          and Chairman of the Board of Directors of the Company from December          1992 to present; President of the Company December 1992 to September          2000; President and General Manager of Harrah and Reynolds, predecessor          of the Company from 1964 (and sole shareholder from 1972 to present)          to 1993; Chairman of the Board of Directors of River City Associates          Inc. (owner of the Radisson Hotel Huntington) since 1989; Chairman of          the Board of Directors of Broughton Foods Company from November 1996          to June 1999; Director (from 1983 to November 1993) and Chairman of          the Board of Directors (from 1983 to November 1993) of Banc One West          Virginia Corporation (formerly Key Centurion Bancshares, Inc.).                                                                                                                                                                                                                                                     |
| Kirby J. Taylor                        | 59      | President and Chief Operating          Officer of the Company since September 2000; President and Chief Executive          Officer of Action Business Consulting from November 1997 to September          2000 (management consulting firm); President and Chief Executive Officer          of Nexquest, Inc. from January 1996 to November 1997; President and          Chief Operating Officer of Addington Resources, Inc. from July 1994          to January 1996 (mining and waste management company); Vice President          and Chief Financial Officer of Outboard Marine Corp. from April 1993          to July 1994 (manufacturer and distributor of boats and motors); Vice          President and Chief Financial Officer of Tenneco Automotive from August          1990 to April 1993 (manufacturer of auto parts); Senior Vice President          and Chief Financial Officer of Tenneco Minerals from August 1988 to          August 1990; Vice President and Chief Financial Officer of Tenneco Minerals          from February 1984 to August 1988; President of |

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|                |   | Tenneco International          Finance from November 1980 to February 1984.                                                                                                                                                                                                                                                                                                                          |
|---------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| J. Mac Aldridge     | 63     | Vice President          and Division Manager - Stationers since December 1992; Vice President          of Company and Division Manager – Huntington from September 1995          to October 1997; President and General Manager of Stationers since November          1989; Sales Representative of Huntington Division of Harrah and Reynolds          from July 1983 to October 1989.        |
| Gary A. Blackshire  | 52     | Vice President of the          Company since December 1992; Division Manager - Merten September 1998          to April 2001; Division Manager Charleston December 1992 to April 2001;          Division Manager Charleston of Harrah and Reynolds from April 1992 to          December 1992; Sales Representative of Charleston Division of Harrah          and Reynolds from 1975 until April 1992. |
| R. Douglas McElwain | 57     | Vice President and Division          Manager Bourque Printing division of the Company since December 1993;          General Manager of Bourque Printing from June 1993 to December 1993;          Sales Representative of Charleston Division of Harrah and Reynolds and          Company from 1986 until June 1993.                                                                                 |
| Toney K. Adkins     | 55     | Vice President-Administration          of the Company since November 1995; President, KYOWVA Corrugated Container          Company, Inc. from 1991 to 1996.                                                                                                                                                                                                                                          |
| Todd R. Fry         | 39     | Chief Financial Officer          of the Company since November 1999; Treasurer and Chief Financial Officer          of Broughton Foods Company from September 1997 to June 1999; Coopers          & Lybrand L.L.P. from 1991 to September 1997.                                                                                                                                                  |
| Walter R. Sansom    | 75     | Secretary of the Company          since December 1992; Production Coordinator of the Company since December          1992 and of Harrah and Reynolds from August 1968 to December 1992.                                                                                                                                                                                                              |

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| James A. Rhodes          | 48 | Vice President          of the Company since March 1999; President of Consolidated Graphic Communications          Division of Interform since February 1999; Vice President of Sales of          Consolidated Graphic Communications from 1996 to 1999; General Sales          Manager – Eastern Division of Consolidated Graphic Communications          from 1995 to 1996. |
|--------------------------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| William G. Williams, Jr. | 48 | Vice President of the          Company since September 2004; President of Syscan Corporation since          December 1984.                                                                                                                                                                                                                                                          |

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**ITEM        2 ‐ PROPERTIES**

           The        Company conducts its operations from twenty-six (26) different physical        locations, eighteen (18) of which are leased, and eight (8) of which are        owned in fee simple by Company subsidiaries.  The Company does not        anticipate any issues in regards to the renewal of certain leases when        the terms expire.  The properties leased, and certain of the lease        terms are set forth below:

| **Property**                                                                                  |   | **Division Occupying Property**               |   | **Square Feet** |   | **Annual Rental** |   | **Expiration Of Term** |
|-----------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|-----------------|--------|-------------------|--------|------------------------|
| 2450                1st Avenue                Huntington, West Virginia                (1)    |   | Chapman                Printing- Huntington   |   | 85,000          |        | $116,400          |   | 2008                   |
| 1945                5th Avenue                Huntington, West Virginia                (1)    |   | Stationers                                    |   | 37,025          |        | 60,000            |   | 2007                   |
| 615-619                4th Avenue                Huntington, West Virginia                (1) |   | Stationers                                    |   | 59,641          |        | 21,600            |   | 2008                   |
| 405                Ann Street                Parkersburg, West Virginia                (1)    |   | Chapman                Printing - Parkersburg |   | 36,614          |        | 57,600            |   | 2008                   |
| 890                Russell Cave Road                Lexington, Kentucky (1)                   |   | Chapman                Printing - Lexington   |   | 20,135          |        | 57,600            |   | 2007                   |
| 2800                Lynch Road                Evansville, Indiana (1)                         |   | Smith                & Butterfield        |   | 42,375          |        | 116,640           |   | 2009                   |
| 113-117                East Third St.Owensboro,                Kentucky (1)                   |   | Smith                & Butterfield        |   | 8,500           |        | 14,400            |   | 2007                   |
| 1901                Mayview Road                Bridgeville, Pennsylvania                (1)  |   | Interform                Corporation          |   | 120,000         |        | 293,503           |   | 2008                   |
| 736                Carondelet Street                New Orleans, Louisiana                    |   | Upton                Printing                 |   | 15,000          |        | 71,400            |   | 2008                   |
| 5600                Jefferson Highway                Harahan, Louisiana                       |   | Upton                Printing                 |   | 11,250          |        | 65,248            |   | 2005                   |
| 1515                Central Parkway                Cincinnati, Ohio (1)                       |   | The                Merten Company             |   | 40,000          |        | 102,060           |   | 2006                   |
| 217                Robb Street                Baltimore, Maryland (2)                         |   | U.S.                Tag                       |   | 26,000          |        | 39,996            |   | 2005                   |
| 2569                University Avenue                Morgantown, West Virginia                |   | Stationers-Thompson’s                   |   | 9,000           |        | 8,400             |   | 2006                   |
| 1214                Main StreetWheeling, West Virginia                                        |   | CBI                - Wheeling                 |   | 22,000          |        | 36,000            |   | 2009                   |
| 3000                Washington St.Charleston,                West Virginia (3)                |   | Syscan                                        |   | 37,710          |        | 150,840           |   | 2009                   |

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| 2800                Seventh Avenue                Charleston, West Virginia                (4) |   | Syscan |   | 15,000 |  | 90,000 |   | 2006    |
|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--|--------|--------|---------|
| 1704-A                Mileground                Morgantown, West Virginia                      |   | Syscan |   | 4,500  |  | 32,400 |   | Monthly |
| Kirk                and Chestnut Streets                Morgantown, West Virginia              |   | Syscan |   | 6,000  |  | 5,400  |   | Monthly |

 

(1)               Lease is “triple net”, whereby the Company pays for all utilities,        insurance, taxes, repairs and maintenance and all other costs associated        with properties.

(2)               The U.S. Tag operation was relocated to Huntington,        West Virginia in August 2003.                

(3)               Champion has an option to purchase building at end of lease term and Williams        Land Corporation has an option to put the building to Champion at end        of lease term.

(4)               The Company has contractually committed to rent 2800 Seventh Avenue for        not more than two years of which the second year rent expense is $60,000.

                   The Dallas Printing subsidiary owns, and operates from, a single‐story        masonry structure of approximately 19,600 square feet at 321‐323        East Hamilton Street, Jackson, Mississippi.

                   The Chapman Printing Charleston operation is conducted from a single story        masonry building of approximately 21,360 square feet owned by the Company        at 1563 Hansford Street, Charleston, West Virginia. 

           The        Bourque Printing subsidiary owns, and operates from, a single‐story        building of approximately 42,693 square feet building at 10848 Airline        Highway, Baton Rouge , Louisiana. The Company also owns a facility of        approximately 18,501 square feet at 13112 South Choctaw Drive, Baton Rouge,        Louisiana.

           Stationers'        Clarksburg operation is conducted from a single‐story masonry building        of approximately 20,800 square feet owned by the Company at 700 N. Fourth        Street, Clarksburg, West Virginia.

           Donihe        owns, and operates from, a single‐story steel building of approximately        38,500 square feet situated on roughly 14.5 acres at 766 Brookside Drive,        Kingsport, Tennessee.

           Blue        Ridge owns, and operates from, (i) a two‐story masonry        and steel building of approximately 28,000 square feet and a contiguous        1,692 square foot former residential structure at 544 and 560 Haywood        Road, Asheville, North Carolina.

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                   The Capitol subsidiary of Stationers owns and operates from a 22,000 square        foot building at 711 Indiana Avenue, Charleston, West Virginia.         

                   The Company continually reviews its production facilities and has and        continues to consolidate facilities as deemed economically feasible. The        company believes its production facilities are suitable and adequate to        meet current production needs.

**ITEM 3        ‐ LEGAL PROCEEDINGS**

**           **The Company is subject to various claims and legal actions, other        than the claim discussed below, that arise in the ordinary course of business.         In the opinion of management, after consulting with legal counsel, the        Company believes that the ultimate resolution of these claims and legal        actions will not have a material effect on the consolidated financial        statements of the Company.

           On        February 16, 2002, a jury verdict was rendered against the Company in        a civil action brought against the Company in state court in Jackson,        Mississippi. The plaintiff        in this civil action asserted that the Company and its Dallas Printing        Company, Inc. subsidiary had engaged in unfair competition and other wrongful        acts in hiring certain of its employees.  The jury awarded the plaintiff        $1,745,000 in actual damages and $750,000 in punitive damages.

           On        March 1, 2002, the plaintiff filed a motion for attorney’s fees        and costs in the amount of $889,401.  On July 16, 2002, the court        entered an order granting plaintiff $645,119 in attorney fees and expenses,        and ordered that interest on the amount of the jury award accrue from        February 22, 2002.

           The        Company appealed both the jury award and the attorney fee and expense        award.  

           The        Company was advised on February 3, 2004 that the Court of Appeals of the        State of Mississippi had reversed the aforementioned judgment and jury        verdict rendered against the Company and had remanded the case for new        trial. The plaintiff petitioned the appeals court for rehearing of its        ruling on February 17, 2004. The Company’s response was filed on        February 24, 2004. 

           On        June 22, 2004 the Company was advised that the Court of Appeals of the        State of Mississippi had upheld its February 3, 2004 reversal of the judgment        and jury verdict and its remand of the case for new trial and had denied        plaintiff’s petition for rehearing of that decision. Plaintiff filed        a petition for writ of certiorari with the Mississippi Supreme Court to        contest the ruling of the Court of Appeals on July 6, 2004. The Company        filed a response to such petition on July 27, 2004.

           The        Company was advised on September 16, 2004 that the Supreme Court of Mississippi        had upheld the Court of Appeals of the State of Mississippi’s February        3, 2004 reversal of the judgment and jury verdict rendered February 16,        2002 against the Company and had upheld the reversal and remand of the        case for new trial.

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           The        effect of the appeals courts orders of February 3, 2004 and June 22, 2004        and the Mississippi Supreme Court’s denial of plaintiff’s        petition for certiorari is to negate the trial court’s award of        damages and attorneys fees previously granted against the Company, and        grant a new trial on plaintiff’s claims.

###### **ITEM        4 ‐ SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

           No        matters were submitted to a vote of security holders during the fourth        quarter of the fiscal year covered by this report.

###### **PART        II**

###### **ITEM        5 ‐ MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS        AND ISSUER PURCHASES OF EQUITY SECURITIES**

           Champion        common stock has traded on the National Association of Securities Dealers,        Inc. Automated Quotation System (“NASDAQ”) National Market        System since the Offering under the symbol “CHMP.”

           The        following table sets forth the high and low closing prices for Champion        common stock for the period indicated. The range of high and low closing        prices are based on data from NASDAQ and does not include retail mark‐up,        mark‐down or commission.
|           |       |        | **Fiscal Year 2004**  |   |   |        | **Fiscal Year 2003** |   |
|----------------|------------|--------|-----------------------|--------|--------|--------|----------------------|--------|
|           | ** ** |   | **High**              |   |   |        | **Low**              |   |   |   | **High** |   |   |  | **Low** |   |
|           |       |   |                       |   |   |   |                      |   |
| First quarter  |       | **$**  | **4.94**              |   |   | **$**  | **4.11**             |   |   | **$** | **  3.35** |   |   | **$** | **2.45** |   |
| Second quarter |       |   | **   5.40** |   |   |   | **4.46**             |   |   |  | **    3.31** |   |   |   | **2.77** |   |
| Third quarter  |       |   | **4.70**              |   |   |   | **3.94**             |   |   |  | ** 3.88** |   |   |   | **2.70** |   |
| Fourth quarter |       |   | **4.12**              |   |   |   | **3.50**             |   |   |  | ** 5.05** |   |   |   | **3.68** |   |

                   At the close of business on January 7, 2005, there were        476 shareholders of record of Champion common stock. The shareholders        of record are determined by the Company’s transfer agent.

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The following table sets forth the quarterly        dividends per share declared on Champion common stock.
|           |   |   | **Fiscal              Year 2005** |   |   |   | **Fiscal              Year 2004** |   |   |   | **Fiscal              Year 2003** |
|----------------|--------|--------|-----------------------------------|--------|--------|--------|-----------------------------------|--------|--------|--------|-----------------------------------|
|           |   |   |                                   |   |   |   |                                   |   |   |   |                                   |
| First quarter  |   | **$**  | **0.05**                          |   |   | **$**  | **0.05**                          |   |   | **$**  | **0.05**                          |
| Second quarter |   |   | **-**                             |   |   |        | **0.05**                          |   |   |        | **0.05**                          |
| Third quarter  |   |   | **-**                             |   |   |        | **0.05**                          |   |   |        | **0.05**                          |
| Fourth quarter |   |   | **-**                             |   |   |        | **0.05**                          |   |   |        | **0.05**                          |

######  

###### **ITEM        6 – SELECTED FINANCIAL DATA**

                                       **SELECTED CONSOLIDATED FINANCIAL DATA**

           The        following selected consolidated financial data for each of the five years        in the period ended October 31, 2004 have been derived from the Audited        Consolidated Financial Statements of the Company. The information set        forth below should be read in conjunction with the Audited Consolidated        Financial Statements, related notes, and the information contained in        Management's Discussion and Analysis of Financial Condition and Results        of Operations appearing elsewhere herein.

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|                                                                   | **Year              Ended October 31**,                          |
|------------------------------------------------------------------------|------------------------------------------------------------------|
|                                                                   |                                                             |  |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |                                                             |  | **2004** |  |   |   | **2003** |   |   |   | **2002** |   |   |   | **2001              (1)** |   |   |   | **2000** |   |
|                                                                   |                                                             |  |  |  |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
|                                                                   | **(In              thousands, except share and per share data)** |
| **OPERATING            STATEMENT DATA:**                               |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Revenues:**                                                          |                                                             |  |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |
| Printing                                                               |                                                             | **$** | **95,325** |  |   | $ | 96,537 |  |   | $ | 95,194 |  |   | $ | 98,146 |  |   | $ | 96,657 |  |
| Office products            and office furniture                        |                                                             |  | **29,077** |  |   |   | 25,646 |  |   |   | 27,690 |  |   |   | 26,998 |  |   |   | 29,672 |  |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| Total revenues                                                         |                                                             |  | **124,402** |  |   |   | 122,183 |  |   |   | 122,884 |  |   |   | 125,144 |  |   |   | 126,329 |  |
| **Cost of            sales:**                                          |                                                             |  |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |
| Printing                                                               |                                                             |  | **70,209** |  |   |   | 70,352 |  |   |   | 68,771 |  |   |   | 71,816 |  |   |   | 69,376 |  |
| Office products            and office furniture                        |                                                             |  | **19,690** |  |   |   | 17,453 |  |   |   | 19,480 |  |   |   | 18,661 |  |   |   | 19,927 |  |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| Total cost            of sales                                         |                                                             |  | **89,899** |  |   |   | 87,805 |  |   |   | 88,251 |  |   |   | 90,477 |  |   |   | 89,303 |  |
| **Gross            profit**                                            |                                                             |  | **34,503** |  |   |   | 34,378 |  |   |   | 34,633 |  |   |   | 34,667 |  |   |   | 37,026 |  |
| Selling, general            and administrative expense                 |                                                             |  | **33,165** |  |   |   | 31,222 |  |   |   | 30,560 |  |   |   | 31,800 |  |   |   | 32,621 |  |
| Restructuring            costs                                         |                                                             |  | **  -** |  |   |   | - |  |   |   | - |  |   |   | 2,052 |  |   |   | - |  |
| Asset impairment            costs                                      |                                                             |  | **  -** |  |   |   | - |  |   |   | - |  |   |   | 3,061 |  |   |   | - |  |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| **Income            (loss) from operations**                           |                                                             |  | **1,338** |  |   |   | 3,156 |  |   |   | 4,073 |  |   |   | (2,246 | ) |   |   | 4,405 |  |
| Interest income                                                        |                                                             |  | **7** |  |   |   | 4 |  |   |   | 14 |  |   |   | 64 |  |   |   | 71 |  |
| Interest expense          |                                                             |  | **(301** | **)** |   |   | (167 | ) |   |   | (386 | ) |   |   | (891 | ) |   |   | (1,018 | ) |
| Other income                                                           |                                                             |  | **288** |  |   |   | 10 |  |   |   | 73 |  |   |   | 528 |  |   |   | 114 |  |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| **Income            (loss) before income taxes**                       |                                                             |  | **1,332** |  |   |   | 3,003 |  |   |   | 3,774 |  |   |   | (2,545 | ) |   |   | 3,572 |  |
| Income tax            (expense) benefit                                |                                                             |  | **(582** | **)** |   |   | (1,235 | ) |   |   | (1,566 | ) |   |   | 363 |  |   |   | (1,463 | ) |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| Net income            (loss)                                           |                                                             | **$** | ** 750** |  |   | $ | 1,768 |  |   | $ | 2,208 |  |   | $ | (2,182 | ) |   | $ | 2,109 |  |
|                                                                   |                                                             |  |  |  |   |   |  |  |   |   |  |  |   |   |  |  |   |   |  |  |
| **Earnings            (loss) per share:**                              |                                                             |  |   |  |   |   |   |  |   |  |   |  |   |  |   |  |   |  |   |  |
| Basic                                                                  |                                                             | **$** | **0.08** |  |   | $ | 0.18 |  |   | $ | 0.23 |  |   |  $ | (0.22 | ) |   | $ | 0.22 |  |
| Diluted                                                                |                                                             |  | **0.08** |  |   |   | 0.18 |  |   |   | 0.23 |  |   |   | (0.22 | ) |   |   | 0.22 |  |
| **Dividends            per share**                                     |                                                             | **$** | **0.20** |  |   | $ | 0.20 |  |   |  $ | 0.20 |  |   | $ | 0.20 |  |   | $ |    0.20 |  |
| **Weighted            average common shares outstanding:**             |                                                             |  |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |
| Basic                                                                  |                                                             |  | **9,729,000** |  |   |   | 9,714,000 |  |   |   | 9,714,000 |  |   |   | 9,714,000 |  |   |   | 9,714,000 |  |
| Diluted                                                                |                                                             |  | **9,825,000** |  |   |   | 9,761,000 |  |   |   | 9,726,000 |  |   |   | 9,714,000 |  |   |   | 9,714,000 |  |

(1)            The Company initiated a corporate-wide restructuring and profitability        enhancement plan in the third quarter 2001.  As a result of this        plan, the Company recorded a pre-tax charge of $6.1 million or $4.3 million        net of tax or $0.44 per share on a basic and diluted basis.

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|                                              | **At              October 31,**             |
|---------------------------------------------------|---------------------------------------------|
|                                              | **2004**                                    |   | **2003** |   | **2002** |   | **2001** |   | **2000** |
|                                              |                                             |   |
|                                              | **(In Thousands)**                          |   |
| **BALANCE SHEET DATA:**                           |                                        |   |
| Cash and cash equivalents                         | **                $  1,745** |  |     $   2,172 |  |     $  4,507 |  |     $  5,765 |  |    $ 3,174 |
| Working capital                                   | **26,913**                                  |  | 26,977 |  | 26,072 |  |       26,041 |  |     29,070 |
| Total assets                                      | **64,150**                                  |  | 58,469 |  | 59,508 |  |       63,950 |  |     71,559 |
| Long‐term debt (net of current portion) (1) | **8,257**                                   |  | 3,966 |  | 1,805 |  |        4,549 |  |       8,070 |
| Shareholders' equity                              | **41,551**                                  |  | 42,691 |  | 42,866 |  |       42,601 |  |     46,726 |
|                                                   |                                             |  |  |  |  |  |  |  |  |  |  |

(1) Includes non-current borrowings under        the Company’s revolving credit facility.

**ITEM        7 –  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION        AND RESULTS OF OPERATIONS**

###### **OVERVIEW**

           The        Company is a commercial printer, business forms manufacturer and office        products and office furniture supplier in regional markets of the United        States of America, east of the Mississippi River.  The Company has        grown through strategic acquisitions and internal growth.  Through        such growth, the Company has realized regional economies of scale, operational        efficiencies, and exposure of its core products to new markets. The Company        has acquired fifteen printing companies, eight office products and office        furniture companies, one Company with a combined emphasis on both printing        and office products and office furniture and a paper distribution division        (which was subsequently sold in 2001) since its initial public offering        on January 28, 1993. 

           The        Company's net revenues consist primarily of sales of commercial printing,        business forms, tags, other printed products, office supplies, office        furniture, data products and office design services. The Company recognizes        revenues when products are shipped or ownership is transferred and when        services are rendered to the customer. The Company's revenues are subject        to seasonal fluctuations caused by variations in demand for its products.

           The        Company's cost of sales primarily consists of raw materials, including        paper, ink, pre‐press supplies and purchased office supplies, furniture        and data products, and manufacturing costs including direct labor, indirect        labor and overhead. Significant factors affecting the Company's cost of        sales include the costs of paper in both printing and office supplies,        the costs of labor and other raw materials.

           The        Company's operating costs consist of selling, general and administrative        expenses. These costs include salaries, commissions and wages for sales,        customer service, accounting, administrative and executive personnel,        rent, utilities, legal, audit, information systems equipment costs, software        maintenance and depreciation. 

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# **CRITICAL        ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES**

                   The Company’s significant accounting policies are described in Note        1 to the consolidated financial statements included in Item 15 of this        Form 10-K.  The discussion and analysis of the financial statements        and results of operations are based upon the Company’s consolidated        financial statements, which have been prepared in accordance with accounting        principles generally accepted in the United States.  The preparation        of these financial statements requires management to make estimates and        judgments that affect the reported amounts of assets, liabilities, revenues        and expenses, and related disclosure of contingent assets and liabilities.         The following critical accounting policies affect the Company’s        more significant judgments and estimates used in the preparation of the        consolidated financial statements.  There can be no assurance that        actual results will not differ from those estimates.

*                   Asset Impairment: *The Company        is required to test for asset impairment relating to property and equipment        whenever events or changes in circumstances indicate that the carrying        value of an asset might not be recoverable.  The Company applies        Statement of Financial Accounting Standards No. 144, “*Accounting        for the Impairment or Disposal of Long-Lived Assets*” (Statement        No. 144) in order to determine whether or not an asset is impaired.         This standard requires an impairment analysis when indicators of impairment        are present.  If such indicators are present, the standard indicates        that if the sum of the future expected cash flows from the Company’s        asset, undiscounted and without interest charges, is less than the carrying        value, an asset impairment must be recognized in the financial statements.         The amount of the impairment is the difference between the fair value        of the asset and the carrying value of the asset.

                   The Company believes that the accounting estimate related to an asset        impairment is a “critical accounting estimate” because it        is highly susceptible to change from period to period because it requires        management to make assumptions about future cash flows over future years        and that the impact of recognizing an impairment could have a significant        effect on operations.  Management’s assumptions about future        cash flows requires significant judgment because actual operating levels        have fluctuated in the past and are expected to continue to do so in the        future.  Management has discussed the development and selection of        this critical accounting estimate with the audit committee of our board        of directors and the audit committee has reviewed the Company’s        disclosure relating to it in the MD&A.

                   Beginning in fiscal year 2002, goodwill and other intangibles are required        to be evaluated annually for impairment, according to Statement of Financial        Accounting Standards No. 142,*“Goodwill and Other Intangible        Assets.”* (Statement No. 142).  The standard requires a        two-step process be performed to analyze whether or not goodwill has been        impaired.   Step one is to test for potential impairment, and        requires that the fair value of the reporting unit be compared to its        book value including goodwill.  If the fair value is higher than        the book value, no impairment is recognized.  If the fair value is        lower than the book value, a second step must be performed.  The        second step is to measure the amount of impairment loss, if any, and requires        that a hypothetical purchase price allocation be done to determine the        implied fair value of goodwill and other intangibles.  This fair        value is then compared to the carrying value of goodwill and other intangibles.         If the implied fair value is lower than the carrying value, an impairment        must be recorded.  

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                   As discussed in the notes to the financial statements, goodwill and other        intangibles are recorded at the adjusted book value and were analyzed        for impairment with the implementation of Statement No. 142. The fair        value of the Company’s goodwill and other intangibles was estimated        using discounted cash flow methodologies. Based on the analysis, the Company        determined that fair value relating to goodwill and other intangibles        resulted in an implied fair value greater than the book value recorded        for the corresponding goodwill and other intangibles, and therefore no        impairment was recognized in any period subsequent to the adoption of        this statement.

                   The Company believes that the accounting estimate related to the goodwill        and other intangibles impairment is a “critical accounting estimate”        because the underlying assumptions used for the discounted cash flow can        change from period to period and could potentially cause a material impact        to the income statement.  Management’s assumptions about discount        rates, inflation rates and other internal and external economic conditions,        such as earnings growth rate, require significant judgment based on fluctuating        rates and expected revenues.  Additionally, Statement No. 142 requires        that the goodwill and other intangibles be analyzed for impairment on        an annual basis using the assumptions that apply at the time the analysis        is updated.  Management has discussed the development of these estimates        with the audit committee of the board of directors.  Additionally,        the board of directors has reviewed this disclosure and its relation to        MD&A.

*                   Allowance for Doubtful Accounts: *The Company encounters        risks associated with sales and the collection of the associated accounts        receivable.  As such, the Company records a monthly provision for        accounts receivable that are considered to be uncollectible.  In        order to calculate the appropriate monthly provision, the Company primarily        utilizes a historical rate of accounts receivables written off as a percentage        of total revenue.  This historical rate is applied to the current        revenues on a monthly basis.  The historical rate is updated periodically        based on events that may change the rate such as a significant increase        or decrease in collection performance and timing of payments as well as        the calculated total exposure in relation to the allowance.  Periodically,        the Company compares the identified credit risks with the allowance that        has been established using historical experience and adjusts the allowance        accordingly.    

                   The Company believes that the accounting estimate related to the allowance        for doubtful accounts is a “critical accounting estimate”        because the underlying assumptions used for the allowance can change from        period to period and could potentially cause a material impact to the        income statement and working capital.  Management has discussed the        development and selection of this estimate with the audit committee of        the board of directors, and the board has, in turn, reviewed the disclosure        and its relation to MD&A.

                   During 2004, 2003 and 2002 $488,000, $336,000 and $363,000 of bad debt        expense was incurred and the allowance for doubtful accounts was $1,422,000,        $1,191,000 and $1,397,000 as of October 31, 2004, 2003 and 2002.         The actual write-offs for the periods were $464,000, $543,000 and $398,000        during 2004, 2003 and 2002.  General economic conditions and specific        geographic and customer concerns are major factors that may affect the        adequacy of the allowance and may result in a change in the annual bad        debt expense.  

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                   The following discussion and analysis presents the significant changes        in the financial position and results of operations of the Company and        should be read in conjunction with the Audited Consolidated Financial        Statements and notes thereto included elsewhere herein.

###### **RESULTS        OF OPERATIONS**

           The        following table sets forth for the periods indicated information derived        from the Company's Consolidated Statements of Operations, including certain        information presented as a percentage of total revenues. 
|                                                    |                                            | **Year              Ended October 31,** |
|---------------------------------------------------------|-------------------------------------------------|-----------------------------------------|
|                                                    |                                            | **($              In thousands)**       |
|                                                    |                                            |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |                                            |                                         |   |  |   |  |
|                                                    |                                            | **2004**                                |   | **2003** |   | **2002** |
|                                                    |                                            |                                         |   |  |   |  |
|                                                    |                                            |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Revenues:**                                           |                                            |                                         |  |   |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |   |  |  |  |  |
|                                                    | Printing                                        |                                    | **$** | **95,325** |   |   |  | **76.6** | **%** |   | $ | 96,537 |  |   |  | 79.0 | % |   | $ | 95,194 |   |   |  | 77.5 | % |
|                                                    | Office            products and office furniture |                                    |  | **29,077** |   |   |  | **23.4** |  |   |  | 25,646 |  |   |  | 21.0 |  |   |  | 27,690 |   |   |  | 22.5 |  |
|                                                    |                                            |                                    |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
|                                                    |                                            | Total            revenues               |   |  | **124,402** |   |   |  | **100.0** |  |   |  | 122,183 |  |   |  | 100.0 |  |   |  | 122,884 |   |   |  | 100.0 |  |
| **Cost            of sales**                            |                                            |                                         |  |   |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |   |   |  |  |  |
|                                                    | Printing                                        |                                    |  | **70,209** |   |   |  | **56.4** |  |   |  | 70,352 |  |   |  | 57.6 |  |   |  | 68,771 |   |   |  | 56.0 |  |
|                                                    | Office            products and office furniture |                                    |  | **19,690** |   |   |  | **15.8** |  |   |  | 17,453 |  |   |  | 14.3 |  |   |  | 19,480 |   |   |  | 15.8 |  |
|                                                    |                                            |                                    |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
|                                                    |                                            | Total            cost of sales          |   |  | **89,899** |   |   |  | **72.2** |  |   |  | 87,805 |  |   |  | 71.9 |  |   |  | 88,251 |   |   |  | 71.8 |  |
|                                                    |                                            |                                    |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
| **Gross            Profit**                             |                                            |                                         | **34,503** |   |   |  | **27.8** |  |   |  | 34,378 |  |   |  | 28.1 |  |   |  | 34,633 |   |   |  | 28.2 |  |
| Selling,            general and administrative expenses |                                            |                                         | **33,165** |   |   |  | **26.7** |  |   |  | 31,222 |  |   |  | 25.6 |  |   |  | 30,560 |   |   |  | 24.9 |  |
|                                                    |                                            |                                    |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
| Income            from operations                       |                                            |                                         | **1,338** |   |   |  | **1.1** |  |   |  | 3,156 |  |   |  | 2.5 |  |   |  | 4,073 |   |   |  | 3.3 |  |
| **Other            income (expense):**                  |                                            |                                         |  |   |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |   |   |  |  |  |
|                                                    | Interest            income                      |                                    |  | **7** |   |   |  | **0.0** |  |   |  | 4 |  |   |  | 0.0 |  |   |  | 14 |   |   |  | 0.0 |  |
|                                                    | Interest            expense                     |                                    |  | **(301** | **)** |   |  | **(0.2** | **)** |   |  | (167 | ) |   |  | (0.1 | ) |   |  | (386 | ) |   |  | (0.3 | ) |
|                                                    | Other            income                         |                                    |  | **288** |   |   |  | **0.2** |  |   |  | 10 |  |   |  | 0.0 |  |   |  | 73 |   |   |  | 0.1 |  |
|                                                    |                                            |                                    |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
| Income            before income taxes                   |                                            |                                         | **1,332** |   |   |  | **1.1** |  |   |  | 3,003 |  |   |  | 2.4 |  |   |  | 3,774 |   |   |  | 3.1 |  |
|                                                    | Income            tax expense                   |                                    |  | **(582** | **)** |   |  | **(0.5** | **)** |   |  | (1,235 | ) |   |  | (1.0 | ) |   |  | (1,566 | ) |   |  | (1.3 | ) |
|                                                    |                                            |                                    |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |
| Net            income                                   |                                            | **$**                                   | **750** |   |   |  | **0.6** | **%** |   | $ | 1,768 |  |   |  | 1.4 | % |   | $ | 2,208 |   |   |  | 1.8 | % |
|                                                    |                                            |                                    |   |  |  |   |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |   |   |  |  |  |

 

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###### **Year        Ended October 31, 2004 Compared to Year Ended October 31, 2003**

Revenues

                   Consolidated net revenues were $124.4 million for the year ended October        31, 2004 compared to $122.2 million in the prior fiscal year. This change        represents an increase in revenues of approximately $2.2 million or 1.8%.        Printing revenues decreased by $1.2 million or 1.3% from $96.5 million        in 2003 to $95.3 million in 2004.  The decrease in printing sales        was reflective of an industry wide sluggish print economy as well as competitive        market factors partially offset by two months of sales from the Syscan        acquisition. Office products and office furniture revenue increased $3.4        million or 13.4% from $25.6 million in 2003 to $29.1 million in 2004.        The increase in revenues for the office products and office furniture        segment was primarily attributable to a full years sales in 2004 for Contract        Business Interiors and two months of sales from the Syscan acquisition.

Cost        of Sales

                   Total cost of sales for the year ended October 31, 2004 totaled $89.9        million compared to $87.8 million in the previous year. This change represented        an increase of $2.1 million or 2.4% in cost of sales. Printing cost of        sales decreased $140,000 or 0.2% to $70.2 million in 2004 compared to        $70.4 million in 2003. Printing cost of sales were lower due to an overall        decrease in printing sales. This, coupled with competitive pressures and        overhead related costs associated primarily with equipment relocations        resulting from facility consolidations, led to gross margin compression        in 2004. Office products and office furniture cost of sales increased        $2.2 million to $19.7 million in 2004 from $17.5 million in 2003. This        resulted in enhanced gross margins due to lower cost of goods sold resulting        from continued purchasing reductions from imports, enhanced market pricing        power due in part to contractual pricing adjustments and stable margins        on remaining furniture sales.

Operating        Expenses and Income

                   Selling, general and administrative (S,G&A) expenses increased $1.9        million to $33.2 million in 2004 from $31.2 million in 2003. S,G&A        as a percentage of net sales represented 26.7% of net sales in 2004 compared        with 25.6%  of net sales in 2003. This increase is related, in part,        to higher payroll and other selling costs to support sales growth initiatives,        increased bad debt expenses and professional service related expenses        and operating costs of acquired entities.

Other        Income (Expense)

                       Other expense decreased approximately $150,000 from ($153,000) in 2003        to ($6,000) in 2004, due to higher other income primarily related to the        gains on the sale of two buildings during 2004 and a casualty gain resulting        from a roof collapse at one division. These gains were offset by increased        interest expense of $130,000 primarily as a result of an increase in interest        rates and higher outstanding borrowings.

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Income Taxes

           Income        taxes as a percentage of income before taxes were 43.7% in 2004 compared        with  41.1% in 2003. The increase in income taxes as a percentage        of income before taxes is primarily related to the nondeductibility of        certain selling related expenses.

           The        effective income tax rate in 2004 and 2003 approximates the combined federal        and state, net of federal benefit, statutory income tax rate.

Net Income

           For        reasons set forth above, net income for 2004 decreased $1.0 million to        $750,000, or $0.08 per share on a basic and diluted basis, from net income        of $1.8 million for 2003, or $0.18 per share on a basic and diluted basis.

######  

###### **Year        Ended October 31, 2003 Compared to Year Ended October 31, 2002**

Revenues

                   Consolidated net revenues were $122.2 million for the year ended October        31, 2003 compared to $122.9 million in the prior fiscal year. This change        represents a decrease in revenues of approximately $700,000 or 0.6%. Printing        revenues increased by $1.3 million or 1.4% from $95.2 million in 2002        to $96.5 million in 2003.  The increase in printing sales was primarily        due to the addition of a new large customer and additional sales derived        primarily from the operations of certain assets purchased from Integrated        Marketing Solutions in July 2003. Office products and office furniture        revenue decreased $2.0 million or 7.4% from $27.7 million in 2002 to $25.6        million in 2003. The decrease in revenues for the office products and        office furniture segment was primarily attributable to an industry-wide        slowdown in office furniture sales.

Cost        of Sales

                   Total cost of sales for the year ended October 31, 2003 totaled $87.8        million compared to $88.3 million in the previous year. This change represented        a decrease of $446,000 or 0.5% in cost of sales. Printing cost of sales        increased $1.6 million or 2.3% to $70.4 million in 2003 compared to $68.8        million in 2002. Printing cost of sales were higher due to an overall        increase in printing sales this coupled with competitive pressures led        to gross margin compression in 2003. Office products and office furniture        cost of sales decreased $2.0 million to $17.5 million in 2003 from $19.5        million in 2002. This resulted in enhanced gross margins due to lower        cost of goods sold resulting from purchasing reductions from imports and        stronger margins on remaining furniture sales.

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Operating        Expenses and Income

                   Selling, general and administrative (S,G&A) expenses increased $700,000        to $31.2 million in 2003 from $30.6 million in 2002. S,G&A as a percentage        of net sales represented 25.6% of net sales in 2003 compared with 24.9%         of net sales in 2002. This increase is related, in part, to increases        in insurance related expenses including health, general commercial and        workers compensation.

Other        Income (Expense)

                   Interest expense decreased $219,000 to $167,000 in 2003 from $387,000        in 2002 primarily as a result of a decrease in interest rates and lower        outstanding borrowings.

Income Taxes

           Income        taxes as a percentage of income before taxes were 41.5% in 2002 compared        with  41.1% in 2003. 

           The        effective income tax rate in 2003 and 2002 approximates the combined federal        and state, net of federal benefit, statutory income tax rate.

Net Income        

           For        reasons set forth above, net income for 2003 decreased $440,000 to $1.8        million, or $0.18 per share on a basic and diluted basis, from net income        of $2.2 million for 2002, or $0.23 per share on a basic and diluted basis.

###### **LIQUIDITY        AND CAPITAL RESOURCES**

           As        of October 31, 2004, the Company had $1.7 million of cash and cash equivalents,        a decrease of $426,000 from the prior year. Working capital as of October        31, 2004 was $26.9 million, a 0.2% decrease from $27.0 million at October        31, 2003. 

           The        Company has historically used cash generated from operating activities        and debt to finance capital expenditures and the cash portion of the purchase        price of acquisitions. Management plans to continue making significant        investments in equipment and to seek appropriate acquisition candidates.        However, to fund the Company's continued expansion of operations, additional        financing may be necessary. The Company has two available lines of credit        totaling $11.0 million (See Note 3 of the Consolidated Financial Statements).        For the foreseeable future including through Fiscal 2005, management believes        it can fund operations, meet debt service requirements and make the planned        capital expenditures based on the available cash and cash equivalents,        cash flow from operations and lines of credit.

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                   Additionally, the Company has minimal amounts of future contracted obligations        (See Note 3 and Note 6 of the Consolidated Financial Statements). The        Company is not a guarantor of indebtedness of others. The Company’s        off balance sheet arrangements at October 31, 2004 relate to the Syscan        acquisition and are associated with potential contingent purchase price        consideration of $1.5 million payable in October 2006 and a put option        from Williams Land Corporation to sell a building to the Company for $1.5        million. This option may be exercised no later than 60 days prior to the        end of the lease and closing of said purchase cannot exceed 45 days from        the end of the lease.

                   As of October 31, 2004 the Company had contractual obligations in the        form of leases and debt as follows:

**Payments        Due by Fiscal Year**
| **Contractual              Obligations** |   | **2005**                                                                                                                    |   | **2006**                                                             |   | **2007**                                                                                                                    |   | **2008**                                                                                                                    |   | **2009**                                                                                                  |   | **Residual**                                                                                              |   | **Total**                                                             |
|------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
|                                     |   |                                                                                                                        |   |                                                                 |   |                                                                                                                        |   |                                                                                                                        |   |                                                                                                      |   |                                                                                                      |   |                                                                  |
| Non-cancelable              operating    |   |                                                                                                                        |   |                                                                 |   |                                                                                                                        |   |                                                                                                                        |   |                                                                                                      |   |                                                                                                      |   |                                                                  |
| leases                                   |   |  $              1,399,647                                                                                              |   |  $              1,220,998                                       |   |  $                 945,183                                                                              |   |  $                 701,474                                                                              |   |  $              253,340                                                                              |   |  $                          -            |   |  $                4,520,642                            |
|                                     |   |                                                                                                                             |   |                                                                      |   |                                                                                                                             |   |                                                                                                                             |   |                                                                                                           |   |                                                                                                           |   |                                                                       |
| Revolving              line of credit    |   |                                 - |   |                  2,300,000                            |   |                                 - |   |                                 - |   |                              - |   |                              - |   |                    2,300,000                 |
|                                     |   |                                                                                                                             |   |                                                                      |   |                                                                                                                             |   |                                                                                                                             |   |                                                                                                           |   |                                                                                                           |   |                                                                       |
| Term              debt                   |   |                  1,555,911                                                                                   |   |                  1,561,364                            |   |                  1,580,206                                                                                   |   |                  1,583,979                                                                                   |   |                  300,328                                                                   |   |                  914,446                                                                   |   |                    7,496,234                 |
|                                     |   |                                                                                                                             |   |                                                                      |   |                                                                                                                             |   |                                                                                                                             |   |                                                                                                           |   |                                                                                                           |   |                                                                       |
| Obligations              under capital   |   |                                                                                                                             |   |                                                                      |   |                                                                                                                             |   |                                                                                                                             |   |                                                                                                           |   |                                                                                                           |   |                                                                       |
| leases                                   |   |                     132,518                                                                   |   |                       16,484 |   |                                 - |   |                                 - |   |                              - |   |                              - |   |                       149,002 |
|                                     |   |                                                                                                                             |   |                                                                      |   |                                                                                                                             |   |                                                                                                                             |   |                                                                                                           |   |                                                                                                           |   |                                                                       |
|                                     |   |                                                                                                                             |
|                                     |   |  $              3,088,076                                                                                              |   |  $              5,098,846                                       |   |  $              2,525,389                                                                                              |   |  $              2,285,453                                                                                              |   |  $              553,668                                                                              |   |  $              914,446                                                                              |   |  $              14,465,878                                       |
|                                     |   |                                                                                                                             |

Cash Flows        from Operating Activities

           Cash        flows from operating activities for the years ended October 31, 2004,        2003 and 2002 were $4.8 million, $4.6 million and $5.8 million. Cash flows        from operating activities for the fiscal year 2004 compared to 2003 were        reflective of additional cash generated in 2004 from changes in assets        and liabilities, increased depreciation and amortization expense and higher        bad debt expense partially offset by a reduction in net income.

Cash Flows from Investing Activities

           Cash        used in investing activities was ($7.5) million, ($3.7) million and ($1.1)        million for the years ended October 31, 2004, 2003 and 2002. Cash flows        used in investing activities increased due to capital expenditures associated        with equipment purchases, building improvements and expansion as well        as the acquisition of Syscan Corporation. These expenditures were partially        offset by proceeds from the sale of two buildings in 2004. Cash flows        used in investing activities increased in 2003 compared to 2002 due to        the purchase of a building in Baton Rouge, Louisiana and the purchase        of additional equipment including several new presses, coupled with a        decrease in proceeds from asset sales in 2003. In 2002 the Company sold        two buildings which were reflected as proceeds from the sale of fixed        assets.

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Cash Flows        from Financing Activities

           Net        cash flows provided by and (used in) financing activities for the years        ended October 31, 2004, 2003, and 2002 were $2.2 million, ($3.2) million        and ($6.0) million. During 2004, net borrowings exceeded cash payments        thus generating cash flow from financing activities.  Net cash flows        used in financing activities decreased in 2003 compared to 2002 due to        an increase in borrowings. Dividends paid in 2004, 2003 and 2002 were        $1.9 million per year.

###### **INFLATION        AND ECONOMIC CONDITIONS**

                   Management believes that the effect of inflation on the Company's operations        has not been material and will continue to be immaterial for the foreseeable        future. The Company does not have long-term contracts; therefore, to the        extent permitted by competition, it has the ability to pass through to        its customers most cost increases resulting from inflation, if any. In        addition, the Company is not particularly energy dependent; therefore,        an increase in energy costs should not have a significant impact on the        Company.

###### **SEASONALITY**

                       Historically, the Company has experienced a greater portion        of its profitability in the second and fourth quarters than in the first        and third quarters. The second quarter generally reflects increased orders        for printing of corporate annual reports and proxy statements. A post‐Labor        Day increase in demand for printing services and office products coincides        with the Company's fourth quarter.

###### **NEWLY        ISSUED ACCOUNTING STANDARDS**

                       In December 2004, the FASB issued SFAS No. 123R (revised        2004), *Share-Based Payment*. This statement revises SFAS No. 123,        *Accounting for Stock-Based Compensation*, and requires companies        to expense the value of employee stock options and similar awards. The        effective date of this standard is interim and annual periods beginning        after June 15, 2005. 

                   Historically, the Company has elected to follow the intrinsic value method        in accounting for its employee stock options. Accordingly, because the        exercise price of the Company’s employee stock options equals the        market price of the underlying stock on the date of grant, no compensation        expense is recognized.

                   Upon the adoption of SFAS No. 123R the Company will be required to expense        stock options in its Statement of Operations when they are granted. For        the years ended October 31, 2004, 2003 and 2002, total stock-based employee        compensation expense, net of related tax effects determined under this        new standard would have been $109,962, $62,250 and $38,704. With the adoption        of its 2003 Stock Option Plan, the Company has approximately 352,000 ungranted        stock options. The Company will incur expense immediately upon the granting        of these stock options in future years upon the effective date of this        standard.

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**ITEM        7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

                   The Company does not have any significant exposure relating to market        risk.

###### **ITEM        8 ‐ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

                   The financial statements and other information required by this Item are        contained in the financial statements and footnotes thereto included in        Item 15 and listed in the index on page F‐1 of this report.

**ITEM        9 ‐ CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING        AND FINANCIAL DISCLOSURE**

                   The Board of Directors selects the independent accountants for the Company        each year.  On February 4, 2004, the Company dismissed Ernst &        Young LLP and engaged the firm of BKD, LLP as its independent accountants        for the fiscal year ended October 31, 2004.  During the Company’s        two most recent fiscal years and through the date of discharge of Ernst        & Young LLP, there were no disagreements with Ernst & Young LLP        on any matters of accounting principles or practices, financial statement        disclosure, or auditing scope and procedures which, if not resolved to        the satisfaction of Ernst & Young LLP, would have caused Ernst &        Young LLP to make reference to the matter in its report.  The reports        of Ernst & Young LLP on the Company’s financial statements for        the fiscal years ended October 31, 2003 and October 31, 2002, contained        no adverse opinion or disclaimer of opinion and were not qualified or        modified as to uncertainty, audit scope or accounting principles.         The Company has requested Ernst & Young LLP to furnish to the Company        a letter addressed to the Commission stating whether it agrees with the        above statements.  Such letter, received by the Company on February        9, 2004, was filed as an exhibit to a Form 8-K filed by the Company with        the Securities and Exchange Commission on February 9, 2004.  The        decision to change accountants was approved by the Audit Committee of        the Board of Directors of the Company and ratified by the Board of Directors.

**ITEM        9A – CONTROLS AND PROCEDURES**

**           **Company management, including the Chief        Executive Officer, Chief Operating Officer and Chief Financial Officer,        has conducted an evaluation of the effectiveness of disclosure controls        and procedures pursuant to Exchange Act Rule 13a-15c as of the end of        the period covered by this annual report. Based on that evaluation, the        Chief Executive Officer, Chief Operating Officer and Chief Financial Officer        concluded that the disclosure controls and procedures are effective in        ensuring that all material information required to be filed in this annual        report has been made known to them in a timely fashion. There were no        changes in internal controls over financial reporting during the fourth        fiscal quarter that have materially affected or are reasonably likely        to materially affect the Company’s internal controls over financial        reporting.

31

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##### 

 

**ITEM        9B – OTHER  INFORMATION**

                   On September 9, 2004, Bourque Printing, Inc. executed and delivered to        First Century Bank, Bluefield, West Virginia, its promissory note together        with commercial security agreement, guaranty and cross-collateralization        and cross-default agreement in original principal amount of $600,075,        bearing interest at the prime rate, maturing October 9, 2009. This note        is Exhibit 10.4 to this Form 10-K.                 

                   On October 26, 2004, the Company executed and delivered to United Bank,        Inc., Huntington, West Virginia, its promissory note and security agreement        in original principal amount of $3,920,000, bearing interest at Wall Street        Journal Prime, maturing October 26, 2008. The proceeds of this note constituted        permanent financing for the Company’s acquisition of Syscan Corporation        reported on Form 8-K on September 10, 2004. This note is Exhibit 10.5        to this Form 10-K.

**           **By letter dated December 28, 2004 in        connection with the Business Loan Agreement in amount of $1,440,000 between        the Company’s Bourque Printing subsidiary and Hibernia National        Bank, the bank deleted the payment on demand feature of this loan.          Such letter is filed as Exhibit 10.6 to this Form 10-K.

**PART        III**

**ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

                   Information relating to the directors of the Company is contained under        the captions “Elections of Directors”, “Director Meetings,        Committees and Attendance”, “Section 16a Beneficial Ownership        Reporting Compliance” and “Code of Ethics” in the Company’s        definitive Proxy Statement, expected to be dated February 18, 2005, with        respect to the Annual Meeting of Shareholders to be held on March 21,        2005, which will be filed pursuant to regulation 14(a) of the Securities        Exchange Act of 1934 and which is incorporated herein by reference. Certain        information concerning executive officers of the Company appear in “EXECUTIVE        OFFICERS OF CHAMPION” at Part I of this report.

###### **ITEM        11 - EXECUTIVE COMPENSATION**

                   The information called for by this Item is contained under the captions        “Compensation        of Directors and Officers”, “Compensation Committee Report        on Executive Compensation” and “Stock Performance Graph”        in the Company’s definitive Proxy Statement, expected to be dated        February 18, 2005, with respect to the Annual Meeting of Shareholders        to be held on March 21, 2005, which will be filed pursuant to regulation        14(a) of the Securities Exchange Act of 1934 and which is incorporated        herein by reference.

32

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##### 

 

**ITEM        12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND        RELATED STOCKHOLDER MATTERS**

                   The information called for by this Item is contained under the captions        “Equity Compensation Plan Information” and “Ownership        of Shares” in the Company’s definitive Proxy Statement,        expected to be dated February 18, 2005, with        respect to the Annual Meeting of Shareholders to be held on March 21,        2005, which will be filed pursuant to regulation 14(a) of the Securities        Exchange Act of 1934 and which is incorporated herein by reference.

###### **ITEM        13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

                   The information called for by this Item is contained under the caption        “Transactions with Directors, Officers and Principal Shareholders”        in the Company’s definitive Proxy Statement, expected to be dated        February 18, 2005, with respect to the Annual Meeting of Shareholders        to be held on March 21, 2005, which will be filed pursuant to regulation        14(a) of the Securities Exchange Act of 1934 and which is incorporated        herein by reference.

###### **ITEM 14         - PRINCIPAL ACCOUNTANT FEES AND SERVICES**

                   The information called for by this Item is contained under the caption        “Independent Accountants” in the Company’s definitive        Proxy Statement, expected to be dated February 18, 2005, with respect        to the Annual Meeting of Shareholders to be held on March 21, 2005, which        will be filed pursuant to regulation 14(a) of the Securities Exchange        Act of 1934 and which is incorporated herein by reference.

**PART IV**

**ITEM        15 ‐ EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM        8‐K**

(a) (1) and (2)  

         The        Consolidated Financial Statements and Schedule, required by Item 8, are        listed on the index on page F-1 and included as part of Item 15.

> All other Schedules for which provision        is made in the applicable accounting regulation of the Securities and        Exchange Commission are not required under the related instructions or        are inapplicable and therefore have been omitted.

33

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##### 

| (2)  |   | Plan            of Acquisition                                                        | Stock Purchase Agreement between Company            and William G. Williams, Jr., sole shareholder of Syscan Corporation,            dated September 7, 2004 filed as Exhibit 2.1 to Form 8-K dated September            7, 2004, filed September 10, 2004, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------|--------|---------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)       | 3.1    | Articles of            Incorporation                                                  | Filed as Exhibit 3.1 to Form 10-Q dated            June 16, 1997, filed on June 16, 1997, incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|      | 3.2    | Bylaws                                                                                | Filed as Exhibit 3.2 to Registration            Statement on Form S-1, File No. 33-54454, filed on November 10, 1992,            incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (4)       |   | Instruments            defining the rights of security holders, including debentures. | See Exhibit            3.1 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (10)      |   | Material Contracts                                                                    | Realty Lease              dated January 28, 1993 between ADJ Corp. and Company regarding 2450              1st Avenue, Huntington, West Virginia, filed as Exhibit 10.1 to              Form 10-K dated January 27, 1994, filed January 31, 1994, is incorporated              herein by reference.

Realty Lease dated January 28, 1993              between The Harrah and Reynolds Corporation and Company regarding              615 4th Avenue, Huntington, West Virginia, filed as Exhibit 10.2              to Form 10-K dated January 27, 1994, filed January 31, 1994, is              incorporated herein by reference.              Realty Lease dated January 28, 1993 between ADJ Corp. and Company              regarding 617-619 4th Avenue, Huntington, West Virginia, filed as              Exhibit 10.3 to Form 10-K dated January 27, 1994, filed January              31, 1994, is incorporated herein by reference.              Realty Lease dated January 28, 1993 between The Harrah and Reynolds              Corporation and Company regarding 1945 5th Avenue, Huntington, West              Virginia, filed as Exhibit 10.4 to Form 10-K dated January 27, 1994,              filed January 31, 1994, is incorporated herein by reference. |

34

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##### 

|   |   |   | Realty Lease dated January 28, 1993 between Printing Property Corp.              and Company regarding 405 Ann Street, Parkersburg, West Virginia,              filed as Exhibit 10.5 to Form 10-K dated January 27, 1994, filed              January 31, 1994, is incorporated herein by reference. 

Realty Lease dated January 28, 1993              between Printing Property Corp. and Company regarding 890 Russell              Cave Road, Lexington, Kentucky, filed as Exhibit 10.6 to Form 10-K              dated January 27, 1994, filed January 31, 1994, is incorporated              herein by reference. 

Realty Lease dated January 28, 1993              between BCM Company, Ltd. and Company regarding 1563 Hansford Street,              Charleston, West Virginia, filed as Exhibit 10.7 to Form 10-K dated              January 27, 1994, filed January 31, 1994, is incorporated herein              by reference.              Lease dated April 11, 1994 between Terry and Anis Wyatt and Stationers              Inc. regarding 214 Stone Road, Belpre, Ohio, filed as Exhibit 10.1              to Form 10-K dated January 26, 1995, filed January 27, 1995, is              incorporated herein by reference.               Form of Indemnification Agreement between Company and all directors              and executive officers, filed as Exhibit 10.4 to Registration Statement              on Form S-1, File No. 33-54454, filed on November 10, 1992, is incorporated              herein by reference.

Lease Agreement dated June 1, 1995              between Owl Investors Joint Venture and U.S. Tag & Ticket Company,              Inc. regarding 2217 Robb Street, Baltimore, Maryland filed as Exhibit              10.1 to Form 10-K dated January 26, 1996, filed January 26, 1996,              is incorporated herein by reference.

Lease Agreement dated June 1, 1972              between Earl H. and Elaine D. Seibert and Smith & Butterfield              Co., Inc. regarding 113-117 East Third Street, Owensboro, Kentucky,              filed as Exhibit 10.3 to Form 10-K dated January 28, 1997, filed              January 28, 1997, is incorporated herein by reference. |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

35

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##### 

|   |   |   | $12,500,000 Term Loan Credit Agreement by and among Champion Industries,              Inc. and the Banks Party thereto and PNC Bank, National Association,              as Agent, dated as of March 31, 1997, as amended by Amendment No.              1 to Credit Agreement dated August 1, 1997, filed as Exhibit 10.1              to Form 10-K dated January 29, 1998, filed January 29, 1998, is              incorporated herein by reference.

$5,600,000 Term Loan Credit Agreement              by and among the Company and its subsidiaries and PNC Bank, National              Association, dated as of March 13, 1998, together with promissory              note and representative security agreement attendant thereto, filed              as Exhibit 10.1 to Form 10-K dated January 25, 1999 is incorporated              herein by reference.              Agreement of Lease between Mildred Thompson and Thompson’s              of Morgantown, Inc. dated May 28, 1998, regarding Kirk and Chestnut              Streets, Morgantown, West Virginia, filed as Exhibit 10.3 to Form              10-K dated January 25, 1999, is incorporated herein by reference.                Executive Compensation Plans and            Arrangements
Company's 1993 Stock Option Plan,              effective March 22, 1994, filed as Exhibit 10.14 to Form 10-K dated              January 27, 1994, filed January 31, 1994, is incorporated herein              by reference. 

Company’s 2003 Stock Option              Plan, filed as Exhibit A to proxy statement dated February 12, 2004,              filed February 13, 2004, is incorporated herein by reference.

Form of Stock Option Agreement pursuant              to Company’s 2003 stock option plan filed as exhibit 10.2              to form 10-Q dated September 10, 2004 filed September 13, 2004,              is incorporated herein by reference.

Employment Agreement dated September              7, 2004 among William G. Williams, Jr., Syscan Corporation and the              Company, filed as Exhibit 10.1 to Form 8-K dated September 7, 2004,              filed September 10, 2004, is incorporated herein by reference.

36
   
Confidentiality and              Non-Competition Agreement dated September 7, 2004 among William              G. Williams, Jr., Syscan Corporation and the Company, filed as Exhibit              10.2 to Form 8-K dated September 7, 2004, filed September 10, 2004,              is incorporated herein by reference.              Agreement of Lease between ADJ Corp and Champion Industries, Inc.              dated January 1, 1999, regarding Industrial Lane in Kyle Industrial              filed Exhibit 10.1 to Form 10-K dated January 25, 2000, filed January              28, 2000, is incorporated herein by reference.              $10,000,000 revolving credit agreement by and among the Company              and its subsidiaries and National City Bank dated as of April 1,              1999, filed as Exhibit 10.2 to Form 10-K dated January 25, 2000,              filed January 28, 2000, is incorporated herein by reference.              Lease Agreement dated November 1, 1999 between Randall M. Schulz,              successor trustee of The Butterfield Family Trust No. 2 and Smith              & Butterfield Co., Inc. regarding 2800 Lynch Road, Evansville,              Indiana, filed as Exhibit 10.3 to Form 10-K              dated January 25, 2000, filed January 28, 2000, is incorporated              herein by reference.              Agreement of Lease dated September 25, 1998 between Ronald H. Scott              and Frank J. Scott dba St. Clair Leasing Co. and Interform Corporation,              regarding 1901 Mayview Road, Bridgeville , Penn­sylvania, filed              as Exhibit 10.4 to Form 10-K dated January 25, 2000, filed January              28, 2000, is incorporated herein by reference.

First Amendment of Real Estate Lease              Agreement dated May 6, 2003 by and between Ronald H. Scott and Frank              J. Scott dba St. Clair Leasing Company and Interform Corporation,              filed as Exhibit 10.1 to Form 8-K filed October 4, 2004, is incorporated              herein by reference.

37
   
$1,000,000 revolving              line of credit between Stationers, Inc. and First Sentry Bank dated              as of October 17, 2000, filed as Exhibit 10.1 to form 10-K dated              January 22, 2001, filed January 26, 2001, is incorporated herein              by reference.              $2,690,938 Business Loan agreement by and among the Company and              One Valley Bank National Association (BB&T), dated as of May              6, 1999, together with Promissory Note and Commercial Security Agreement,              filed as Exhibit 10.4 to form 10-K dated January 22, 2001, filed              January 26, 2001 is incorporated herein by reference.               $618,720 Promissory Note by and among the Company and Bank One,              West Virginia, N.A. dated as of June 6, 2000 together with commercial              security agreement, filed as Exhibit 10.5 to form 10-K dated January              22, 2001, filed January 26, 2001, is incorporated herein by reference.              $550,000 Promissory Note by and among the Company and Bank One,              West Virginia, N.A. dated as of August 4, 2000 together with Commercial              Security Agreement and Letter of Understanding, filed as Exhibit              10.6 to form 10-K dated January 22, 2001, filed January 26, 2001,              is incorporated herein by reference.              Agreement of Lease dated September 1, 2002 between Marion B. and              Harold A. Merten, Jr. and The Merten Company regarding 1515 Central              Parkway, Cincinnati, Ohio, Filed as Exhibit (10.1) to form 10-K              dated January 21, 2002, Filed January 25, 2002 is incorporated herein              by reference.              $415,000 Commercial Lease Agreement by and among the company and              Firstar Equipment Finance dated as of January 12, 2001, Filed as              Exhibit (10.2) to form 10-K dated January 21, 2002, Filed January              25, 2002 is incorporated herein by reference.

38
   
 $450,000 Commercial              Lease Agreement by and among the Company and Leasing One Corporation              dated as of April 19, 2001, Filed as Exhibit (10.3) to form 10-K              dated January 21, 2002, Filed January 25, 2002 is incorporated herein              by reference.              $315,665 Promissory Note by and among the Company and Community              Trust Bank, N.A. as of April 27, 2001, Filed as Exhibit (10.4) to              form 10-K dated January 21, 2002, Filed January 25, 2002 is incorporated              herein by reference.              Lease Agreement dated February 27, 1991 between the Alfred J. Moran              Trust and Docutec of Louisiana, Inc. regarding 7868 Anselmo Lane,              Baton Rouge, Louisiana, Filed as Exhibit (10.6) to form 10-K dated              January 21, 2002, Filed January 25, 2002 is incorporated herein              by reference.

Amendment No. 2 to Credit Agreement              by and among the Company and its subsidiaries and National City              Bank dated as of April 1, 2002 along with Amended and Restated Subsidiaries              Guaranty. Filed as Exhibit (10.1) to form 10-K dated January 20,              2003, Filed January 24, 2003 is incorporated herein by reference.

Agreement Amending and Extending              term of lease dated May 24, 2002 between Earl H. and Elaine D. Seibert              and Smith and Butterfield Co., Inc. Filed as Exhibit (10.2) to form              10-K dated January 20, 2003, Filed January 24, 2003 is incorporated              herein by reference.

Promissory Note, $1,000,000 revolving              line of credit between Stationers, Inc. and First Sentry Bank dated              as of October 7, 2002. Filed as Exhibit (10.3) to form 10-K dated              January 20, 2003, Filed January 24, 2003 is incorporated herein              by reference.

Business Loan Agreement, $1,440,000              commercial loan between Bourque Printing Company and Hibernia National              Bank together with promissory note dated as of March 19, 2003,filed              as exhibit 10.1 to form 10-K dated January 19, 2004 filed January              26, 2004, is incorporated herein by reference. 

39
   
Commercial Security              Agreement, $450,050 commercial loan between Champion Industries,              Inc. and First Century Bank dated as of March 2, 2003, filed as              exhibit 10.2 to form 10-K dated January 19, 2004, filed January              26, 2004, is incorporated herein by reference.

Business Loan Agreement, $351,000              commercial loan between Champion Industries, Inc. and City National              Bank together with promissory note dated as of August 14, 2003,              filed as exhibit 10.3 to form 10-K dated January 19, 2004, filed              January 26, 2004, is incorporated herein by reference.

Revolving Credit Agreement, $10,000,000              revolving line of credit between Champion Industries, Inc. and United              Bank, Inc. dated as of August 1, 2003, filed as exhibit 10.4 to              form 10-K dated January 19, 2004, filed January 26, 2004, is incorporated              herein by reference.

Agreement Amending and Extending              term of lease dated May 9, 2003 between Champion Industries, Inc.              DBA, Upton Printing and AMB Property, L.P, filed as exhibit 10.5              to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated              herein by reference.

Agreement Amending and Extending              term of lease dated October 1, 2003 between Bourque Printing DBA,              Upton Printing and M. Field Gomila Et. Al. , filed as exhibit 10.6              to form 10-K dated January 19, 2004 filed January 26, 2004, is incorporated              herein by reference.

Promissory Note, $122,500 between              Champion Industries, Inc. and Community Trust Bank dated as of January              9, 2003, filed as exhibit 10.7 to form 10-K dated January 19, 2004              filed January 26, 2004, is incorporated herein by reference.

  

40
   
Code of Ethics for              the Chief Executive Officer, Chief Operating Officer, Chief Financial              Officer and Chief Accounting Officer, filed as exhibit 14 to form              10-K dated January 19, 2004 filed January 26, 2004, is incorporated              herein by reference.

Code of Business Conduct and Ethics,              filed as exhibit 14.2 to form 10-K dated January 19, 2004 filed              January 26, 2004, is incorporated herein by reference.              Agreement of Lease dated as of September 1, 2004, between Williams              Land Corporation and Syscan Corporation regarding North Hills Drive              and Washington Street, Charleston, West Virginia, filed as Exhibit              10.3 to Form 8-K dated September 7, 2004, filed September 10, 2004,              is incorporated herein by reference. 

Agreement of Lease dated as of September              1, 2004, between Williams Land Corporation and Syscan Corporation              regarding 2800 Seventh Avenue, Charleston, West Virginia, filed              as Exhibit 10.4 to Form 8-K dated September 7, 2004, filed September              10, 2004, is incorporated herein by reference.

Agreement of Purchase and Sale dated              September 7, 2004, between Syscan Corporation and Williams Properties,              LLC regarding 811 Virginia Street, East, Charleston, West Virginia,              filed as Exhibit 10.5 to Form 8-K dated September 7, 2004, filed              September 10, 2004, is incorporated herein by reference.

           
(10.1)  Exercise of Lease renewal option for 2800            Lynch Road Evansville, Indiana dated as of September 22, 2003. Page Exhibit            (10.1)-p1  (10.2)   $1,000,000 Business Loan Agreement and            promissory note by and between the Company and Community Trust Bank,            N.A. as of March 19, 2004. Page Exhibit            (10.2)-p1  
41

 
(10.3)  $1,000,000 revolving line of credit between Stationers,            Inc. and First Sentry Bank dated as of April 7, 2004. Page Exhibit            (10.3)-p1  (10.4)$600,075 term note between            Bourque Printing, Inc. and First Century Bank dated as of September            9, 2004. Page Exhibit            (10.4)-p1  (10.5) $3,920,000 promissory note and security            agreement between Champion Industries, Inc. and United Bank, Inc.            dated as of October 26, 2004. Page Exhibit (10.5)-p1  (10.6)   Modification letter            to promissory note between Bourque Printing and Hibernia National            Bank, Inc. dated December 28, 2004. Page Exhibit            (10.6)-p1  (16) Letter of Ernst &            Young dated February 6, 2004, filed as Exhibit 16 to Form 8-K dated            February 9, 2004, filed February 9, 2004, is incorporated herein by            reference.  (21)Subsidiaries            of the RegistrantExhibit 21                                           Page Exhibit 21-p1(23.1)Consent            of BKD, LLPExhibit 23.1                                        Page ­­­Exhibit 23.1-p1(23.2)Consent            of Ernst & Young LLPExhibit 23.2                                        Page ­­­Exhibit 23.2-p1(31.1)Principal Executive Officer            Certification Pursuant to Section 302 of the Sarbanes-Oxley act of            2002 - Marshall T. ReynoldsExhibit 31.1                                        Page Exhibit 31.1-p1(31.2)Principal Financial Officer            Certification Pursuant to Section 302 of the Sarbanes-Oxley act of            2002 – Todd R. FryExhibit 31.2                                        Page            Exhibit 31.2-p1(31.3)Principal Operating Officer            Certification Pursuant to Section 302 of the Sarbanes-Oxley act of            2002 – Kirby J. TaylorExhibit 31.3                                        Page Exhibit 31.3-p1
42

 

(32)

Marshall              T. Reynolds, Todd R. Fry and Kirby J. Taylor Certification Pursuant              to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of              the Sarbanes-Oxley act of 2002

Exhibit 32                                             Page Exhibit 32-p1

(b)                 Exhibits – Exhibits are filed as a separate section of this        report.

(c)                  Financial Statement Schedules – Filed as separate section        on page F-33.

 

43

 

**SIGNATURES**

           Pursuant        to the requirements of Section 13 or 15(d) of the Securities Exchange        Act of 1934, the registrant has duly caused this report to be signed on        its behalf by the undersigned, thereunto duly authorized.

            
**Champion Industries,              Inc.**
 

 

By                /s/ Marshall T. Reynolds                                                      

Marshall                T. Reynolds

Chief                Executive Officer

 

 

By                /s/ Kirby J. Taylor                                                                

Kirby                J. Taylor

President                and Chief Operating Officer

 

 

By                /s/ Todd R. Fry                                                                    

Todd R. Fry

Vice                President and Chief Financial Officer

 

 

Date:                 January 17, 2005

44

  

                 Pursuant to the requirements of the Securities Exchange Act of 1934, this        report has been signed below by the following persons on behalf of the        registrant and in the capacities indicated and on the dates indicated.

SIGNATURE              AND TITLE
  
DATE
      
/s/              Lou J. Akers
  
January              17, 2005

Lou              J. Akers, Director
          
/s/              Philip E. Cline                                          
  
January              17, 2005

Philip              E. Cline, Director
          
/s/              Harley F. Mooney, Jr.                                 
  
January              17, 2005

Harley              F. Mooney, Jr., Director
       
/s/              A. Michael Perry                                       
  
January              17, 2005

A.              Michael Perry, Director
          
/s/              Marshall T. Reynolds                                  
  
January              17, 2005

Marshall              T. Reynolds, Director
          
/s/              Neal W. Scaggs                                         
  
January              17, 2005

Neal              W. Scaggs, Director
          
/s/              Glenn W. Wilcox, Sr.                                  
  
January              17, 2005

Glenn              W. Wilcox, Sr., Director
    
45
 
**Champion          Industries, Inc.**

Audited          Consolidated Financial Statements and Schedule

October          31, 2004

**Contents**
Reports              of Independent Registered Public Accounting FirmsF-2Audited              Consolidated Financial Statements:  Consolidated              Balance Sheets as of October 31, 2004 and 2003F-4 Consolidated              Statements of Operations for the years ended October 31, 2004, 2003              and 2002F-6 Consolidated              Statements of Shareholders’ Equity for the years ended October              31, 2004, 2003 and 2002F-7 Consolidated              Statements of Cash Flows for the years ended October 31, 2004, 2003              and 2002F-8 Notes              to Consolidated Financial StatementsF-9Schedule              II – Valuation and Qualifying AccountsF-33
 
 
**Report          of Independent Registered Public Accounting Firm**

Audit          Committee, Board of Directors and Stockholders          Champion Industries, Inc.          Huntington, West Virginia
We          have audited the accompanying consolidated balance sheet of Champion          Industries, Inc. and Subsidiaries (the “Company”) as of          October 31, 2004, and the related consolidated statements of operations,          stockholders’ equity, and cash flows for the year  then ended.          Our audit also included the financial statement schedule listed in the          index at Item 15(a). These financial statements and schedule are the          responsibility of the Company’s management. Our responsibility          is to express an opinion on these financial statements and schedule          based upon our audit.

We          conducted our audit in accordance with the standards of the Public Company          Accounting Oversight Board (United States). Those standards require          that we plan and perform the audit to obtain reasonable assurance about          whether the financial statements are free of material misstatement.          An audit includes examining, on a test basis, evidence supporting the          amounts and disclosures in the financial statements. An audit also includes          assessing the accounting principles used and significant estimates made          by management, as well as evaluating the overall financial statement          presentation. We believe that our audit provides a reasonable basis          for our opinion. 

In          our opinion, the consolidated financial statements referred to above          present fairly, in all material respects, the financial position of          the Company at October 31, 2004, and the results of its operations and          its cash flows for the year ended October 31, 2004, in conformity with          accounting principles generally accepted in the United States of America.          Also, in our opinion, the related financial statement schedule, when          considered in relation to the basic financial statements taken as a          whole, presents fairly in all material respects the information set          forth therein. 

                                                                                             /s/ BKD, LLP

Evansville,          Indiana          January 6, 2005

F-2
 
**Report          of Independent Registered Public Accounting Firm**
The Board of Directors and        ShareholdersChampion        Industries, Inc.
We          have audited the accompanying consolidated balance sheets of Champion          Industries, Inc. and Subsidiaries as of October 31, 2003, and the related          consolidated statements of operations, shareholders’ equity, and          cash flows for each of the two years in the period ended October 31,          2003. Our audits also included the financial statement schedule listed          in the index at Item 15(a). These financial statements and schedule          are the responsibility of the Company’s management. Our responsibility          is to express an opinion on these financial statements and schedule          based upon our audits.

We          conducted our audits in accordance with the standards of the Public          Company Accounting Oversight Board (United States). Those standards          require that we plan and perform the audit to obtain reasonable assurance          about whether the financial statements are free of material misstatement.          An audit includes examining, on a test basis, evidence supporting the          amounts and disclosures in the financial statements. An audit also includes          assessing the accounting principles used and significant estimates made          by management, as well as evaluating the overall financial statement          presentation. We believe that our audits provide a reasonable basis          for our opinion.

In          our opinion, the consolidated financial statements referred to above          present fairly, in all material respects, the consolidated financial          position of Champion Industries, Inc. and Subsidiaries at October 31,          2003, and the consolidated results of their operations and their cash          flows for each of the two years in the period ended October 31, 2003,          in conformity with U.S. generally accepted accounting principles. Also,          in our opinion, the related financial statement schedule, when considered          in relation to the basic financial statements taken as a whole, presents          fairly in all material respects the information set forth therein.

                                                                                   /s/ Ernst & Young LLP
Charleston, West VirginiaDecember 31, 2003
F-3
 
**Champion Industries, Inc. and Subsidiaries**

Consolidated Balance Sheets
   
**October 31,**
    
**2004**
 
**2003**
     
**Assets**
    
Current assets:
   
Cash and cash equivalents
 **$**
**1,745,457**
 $
2,171,713
  
Accounts receivable, net of allowance of
    
$1,422,000 and $1,191,000
 
**21,318,016**
 
20,142,812
  
Inventories
 
**11,269,514**
 
11,349,929
  
Other current assets
 
**973,832**
 
739,560
  
Deferred income tax assets
 
**1,144,943**
 
1,059,520
    
Total current assets

**36,451,762**
 
35,463,534
          
Property                and equipment, at cost:
   
Land
 
**2,006,375**
 
2,063,373
  
Buildings and improvements
 
**8,253,573**
 
7,445,219
  
Machinery and equipment
 
**43,228,587**
 
37,682,530
  
Equipment under capital leases
 
**983,407**
 
983,407
  
Furniture and fixtures
 
**3,361,100**
 
2,965,389
  
Vehicles
 
**3,523,467**
 
3,262,861
         
**61,356,509**
 
54,402,779
 
Less                accumulated depreciation

**(41,020,327**
**)** 
(34,964,006
)         
**20,336,182**
 
19,438,773
          
Cash                surrender value of officers' life insurance

**1,039,514**
 
1,020,795
 
Goodwill

**2,060,786**
 
1,929,972
 
Other                intangibles, net of accumulated amortization

**3,812,051**
 
184,418
 
Other                assets

**449,589**
 
431,343
       
 
 
**7,361,940**
 
3,566,528
      
Total                assets
**$**
**64,149,884**
 $
58,468,835
     
 

*See          notes to consolidated financial statements.*

F-4
 
**Champion          Industries, Inc. and Subsidiaries**

Consolidated          Balance Sheets (continued)   
    
 
**October                31,**      
**2004**
   
**2003**
        
**Liabilities                and shareholders' equity**
     
Current                liabilities:
    
Accounts                payable
 **$**
**3,618,051**
 $
3,283,222
  
Accrued                payroll and commissions
 
**1,778,736**
 
1,500,165                
  
Taxes                accrued and withheld
 
**1,289,524**
 
1,259,853                
  
Accrued                income taxes
 
**135,556**
 
707,119                
  
Accrued                expenses
 
**1,028,246**
 
789,676                
  
Current                portion of long-term debt:
     
Notes                payable
 
**1,555,911**
 
744,662                
   
Capital                lease obligations
 
**132,518**
 
202,309                
       
Total current liabilities
 
**9,538,542**
 
8,487,006                
           
Long-term                debt, net of current portion:
    
Line                of credit
 
**2,300,000**
 
                1,705,668 
  
Notes payable
 
**5,940,323**
 
 2,103,569 
  
Capital lease obligations
 
**16,484**
 
156,718
 
Deferred income tax liabilities
 
**4,375,357**
 
2,900,807 
 
Other liabilities
 
**428,366**
 
424,233
     
Total                liabilities
 
**22,599,072**
 
15,778,001                
 
Commitments                and contingencies
   
Shareholders'                equity:
    Common              stock, $1 par value, 20,000,000 shares authorized;               9,733,913 and 9,713,913 shares issued and outstanding 
**9,733,913**
 
9,713,913                
  
Additional                paid-in capital
 
**22,278,110**
 
22,242,047                
  
Retained                earnings
 
**9,538,789**
 
10,734,874                
     
Total                shareholders' equity
 
**41,550,812**
 
42,690,834                
     
Total                liabilities and shareholders' equity
 **$**
**64,149,884**
 $
58,468,835
    
 

*See          notes to consolidated financial statements.*
****
F-5
**Champion          Industries, Inc. and Subsidiaries**
Consolidated          Statements of Operations       
   
**Year                Ended October 31,**
    
**2004**
   
**2003**
   
**2002**
          
Revenues:
    
Printing
 **$**
**95,324,314**
$
96,536,601
$
                95,194,288
 
Office                products and office furniture
 
**29,077,258**

25,646,031

27,689,621                
            
Total                revenues
 
**124,401,572**

122,182,632

122,883,909                
            
Cost                of sales:
 
Printing
 
**70,209,212**

70,351,496

68,770,628                
 
Office                products and office furniture
 
**19,689,542**

17,453,228

19,480,400
            
Total                cost of sales
 
**89,898,754**

87,804,724                

88,251,028                
   
Gross                profit

**34,502,818**

34,377,908                

34,632,881                
   
Selling,                general and administrative expenses

**33,164,699**

31,221,692                

                30,560,289 
         
Income                from operations

**1,338,119**

                3,156,216 

4,072,592                
   
Other                income (expense):
 
Interest                income
 
**6,663**

3,899                

14,376                
 
Interest                expense
 
**(300,742**
**)**
(167,442
)
(386,699
) 
Other
 
**287,750**

10,216                

73,326                
              
**(6,329**
**)**
                (153,327
)
                (298,997
)         Income before taxes 
**1,331,790**

                3,002,889 

3,773,595                
 
Income                tax expense 

**(582,092**
**)**
                (1,235,086
)
(1,565,891
)         
Net                income 
**$**
**749,698**
$
1,767,803
$
2,207,704
           
Earnings per share:
 
Basic
 **$**
**0.08**
$
0.18
$
0.23
 
Diluted
 
**0.08**

                0.18 

                0.23 
   
Dividends                paid per share

**0.20**

                0.20 

                0.20 
   
Weighted                average shares outstanding:
 
Basic
 
**9,729,000**

9,714,000                

9,714,000                
 
Diluted
 
**9,825,000**

9,761,000                

                9,726,000 

    *See          notes to consolidated financial statements.*

 

F-6
 
**Champion          Industries, Inc. and Subsidiaries**

Consolidated          Statements of Shareholders’ Equity
            
 
            
**Common                Stock**
  
 
   
 
                          
**Shares**
   
**Amount**
   
**Additional                Paid-In Capital**
   
**Retained                Earnings**
   
**Total**
                 
Balance, October 31, 2001

                 9,713,913
$
                  9,713,913
 $
                22,242,047
  $
                    10,644,926
  $
                42,600,886
             
 Net income for 2002

–

–
  
–
   
    2,207,704
   
      2,207,704
  
Dividends ($0.20 per share)

–

–
  
–
   
   (1,942,780
)  
      (1,942,780
)                
Balance, October 31, 2002

                 9,713,913

 9,713,913
  
                    22,242,047
   
 10,909,850
   
 42,865,810
             
Net income for 2003

–

–
  
–
   
   1,767,803
   
     1,767,803
  
Dividends ($0.20 per share)

–

–
  
–
   
   (1,942,779
)  
     (1,942,779
)                
Balance, October 31, 2003

                 9,713,913

 9,713,913
  
                    22,242,047
   
 10,734,874
   
 42,690,834
             
**Net                income for 2004**

**–**

**–**
  
**–**
   
**                       749,698**
   
**                       749,698**
  
**Dividends                ($0.20 per share)**

**–**

**–**
  
**–**
   
**     (1,945,783**
**)**  
**     (1,945,783**
) 
**Stock options exercised**

**20,000**

**20,000**
  
**36,063**
   
**                               –**
   
**                         56,063**
                  
**Balance,                October 31, 2004**

**                 9,733,913**
**$**
**9,733,913**
 **$**
**                 22,278,110**
  **$**
**9,538,789**
  **$**
**                  41,550,812**
                 
*See          notes to consolidated financial statements.*

F-7
 
**Champion          Industries, Inc. and Subsidiaries**

Consolidated          Statements of Cash Flows 
      
**Year                Ended October 31,**
      
**2004**

**2003**
 
**2002**

**Cash                flows from operating activities:**
  
Net                income
 **$**
**                 749,698**
$
                 1,767,803
$
                 2,207,704
 
Adjustments                to reconcile net income to cash provided by operating activities:
   
Depreciation                and amortization
 
**4,389,758**

4,288,407

4,182,253
  
                (Gain) loss on sale of assets
 
**(91,420**
**)**
16,014

47,426
  
Deferred income taxes
 
**(35,866**
**)**
(356,773
)
(245,091
)  
Deferred compensation
 
**10,723**

14,297

17,872
  
Bad debt expense
 
**487,550**

336,291

363,328
   
Changes                in assets and liabilities:
     
Accounts                receivable
 
**(268,690**
**)**
(1,932,114
)
255,456
    
Inventories
 
**473,586**

315,535

336,614
    
Other                current assets
 
**(4,052**
**)**
1,006,003

(991,445
)    
Accounts                payable
 
**(616,230**
**)**
25,129

(1,085,196
)    
Accrued                payroll and commissions
 
**148,799**

(503,881
)
(103,331
)    
Taxes                accrued and withheld
 
**(88,742**
**)**
(157,047
)
127,340
    
Accrued                income taxes
 
** (501,213**
**)**
 (166,017
)
1,152,407
    
Accrued                expenses
 
**166,236**

(73,277
)
(399,341
)    
Other                liabilities
 
**(6,590**
**)**
(19,906
)
(21,074
)          
Net                cash provided by operating activities
 
**4,813,547**

4,560,464

5,844,922

**Cash                flows from investing activities:**
   
Purchase of property and equipment
 
**(4,973,834**
**)**
(3,162,658
)
(1,885,111
)  
Proceeds from sale of fixed assets
 
**850,287**

185,534

1,198,720
  
Businesses acquired, net of cash received
 
**(3,034,886**
**)**
(426,429
)
(376,842
)  
 Goodwill and other intangible additions
 
**(227,161**
**)**
(204,031
)
-
  
Change in other assets
 
**(76,437**
**)**
(33,825
)
(21,067
)  
Cash surrender value 
 
**(18,719**
**)**
(72,840
)
-
        
Net cash used in investing activities
 
**(7,480,750**
**)**
(3,714,249
)
(1,084,300
)
**Cash                flows from financing activities:**
   
Borrowings                on line of credit
 
**8,294,591**

3,192,271

1,000,000
  
                Payments on line of credit
 
**(7,581,259**
**)**
(1,500,000
)
(1,000,000
)  
Proceeds                from long-term debt
 
**5,520,000**

923,451

-
  Principal              payments on long-term debt 
**(2,102,665**
**)**
(3,854,584
)
(4,075,419
)  
Proceeds from exercise of stock options
 
**56,063**

-

-
  
Dividends paid
 
**(1,945,783**
**)**
(1,942,779
)
(1,942,780
)        
Net cash provided by (used in) financing                activities
 
**2,240,947**

(3,181,641
)
(6,018,199
)        
Net decrease in cash and cash equivalents
 
**(426,256**
**)**
(2,335,426
)
(1,257,577
)  
Cash and cash equivalents at beginning                of year
 
** 2,171,713**

 4,507,139

 5,764,716
        
Cash and cash equivalents at end of year
 **$**
**                 1,745,457**
$
  2,171,713
$
  4,507,139
      
*See          notes to consolidated financial statements.*

F-8
 **Champion          Industries, Inc. and Subsidiaries**
          Notes to Consolidated Financial Statements (continued)

**1.        Summary of Significant Accounting Policies**
            Champion      is a commercial printer, business forms manufacturer and office products      and office furniture supplier in regional markets in the United States of      America, east of the Mississippi.
            The        accounting and reporting policies of Champion conform to accounting principles        generally accepted in the United States. The preparation of the financial        statements in conformity with generally accepted accounting principles        requires management to make estimates and assumptions that affect the        amounts reported in the financial statements and accompanying notes. Actual        results could differ from these estimates. The following is a summary        of the more significant accounting and reporting policies.

**Principles        of Consolidation**

           The        accompanying consolidated financial statements of Champion Industries,        Inc. and Subsidiaries (the “Company”) include the accounts        of The Chapman Printing Company, Inc., Bourque Printing, Inc., Dallas        Printing Company, Inc., Stationers, Inc., Carolina Cut Sheets, Inc., U.S.        Tag & Ticket Company, Inc., Donihe Graphics, Inc., Smith and Butterfield        Co., Inc., The Merten Company, Interform Corporation, Blue Ridge Printing        Co., Inc., CHMP Leasing, Inc., Rose City Press, Capitol Business Equipment,        Inc., Thompson’s of Morgantown, Inc., Independent Printing Service,        Inc., Diez Business Machines, Transdata Systems, Inc. and Syscan Corporation.

           Significant        intercompany transactions have been eliminated in consolidation.

**Cash        and Cash Equivalents**

           Cash        and cash equivalents consist principally of cash on deposit with banks,        repurchase agreements for government securities, and a money market account,        all highly liquid investments with an original maturity of three months        or less. At October 31, 2004 and 2003, the Company held overnight repurchase        agreements for $834,000 and $1,415,000 of government securities with stated        interest rates of 1.44% and 0.30%. 

**Accounts        Receivable**

           Accounts        receivable are stated at the amount billed to customers. Accounts receivable        are ordinarily due 30 days from the invoice date.  

           The        Company encounters risks associated with sales and the collection of the        associated accounts receivable.  As such, the Company records a monthly        provision for accounts receivable that are considered to be uncollectible.         In order to calculate the appropriate monthly provision, the Company primarily        utilizes a historical rate of accounts receivables written off as a percentage        of total revenue.  This historical rate is applied to the current        revenues on a monthly basis.  The historical rate is updated periodically        based on events that may change the rate such as a significant increase        or decrease in collection performance and timing of payments as well as        the calculated total exposure in relation to the allowance.  Periodically,        the Company compares

F-9
  
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

the        identified credit risks with the allowance that has been established using        historical experience and adjusts the allowance accordingly.           

           During        2004, 2003 and 2002 $488,000, $336,000 and $363,000 of bad debt expense        was incurred and the allowance for doubtful accounts was $1,422,000, $1,191,000        and $1,397,000 as of October 31, 2004, 2003 and 2002.  The actual        write-offs for the periods were $464,000, $543,000 and $398,000 during        2004, 2003 and 2002.  General economic conditions and specific geographic        and customer concerns are major factors that may affect the adequacy of        the allowance and may result in a change in the annual bad debt expense.         

**Inventories**

**         **  Inventories        are principally stated at the lower of first-in, first-out, cost or market.        Manufactured finished goods and work-in-process inventories include material,        direct labor and overhead based on standard costs, which approximate actual        costs.

**Property        and Equipment**

**         **  Depreciation        of property and equipment and amortization of leasehold improvements and        equipment under capital leases are recognized primarily on the straight-line        and declining-balance methods in amounts adequate to amortize costs over        the estimated useful lives of the assets as follows:
Buildings            and improvements 5            - 40 yearsMachinery            and equipment 3            - 10 yearsFurniture            and fixtures   5            - 10 years            Vehicles        3            - 5 years
**         **  The          Company leases certain equipment under financing agreements that are          classified as capital leases. These leases are for a term of five years          and contain purchase options at the end of the original lease term.          Amortization of assets recorded under capital lease agreements is included          in depreciation expense.

**     **      Major          renewals, betterments and replacements are capitalized while maintenance          and repair costs are charged to operations as incurred. Upon the sale          or disposition of assets, the cost and related accumulated depreciation          are removed from the accounts with the resulting gains or losses reflected          in income. Depreciation expense approximated $4,100,000, $4,090,000          and $4,139,000 for the years ended October 31, 2004, 2003 and 2002.          

           Long-lived          property and equipment are reviewed for impairment whenever events or          changes in circumstances indicate that the carrying amount of the asset          may not be recoverable. This evaluation includes the review of operating          performance and estimated future undiscounted cash flows of the underlying          assets or businesses. 

**Goodwill          and Other Intangibles**

           The          excess cost over fair value of net assets of acquired businesses, goodwill,          was in years prior to 2002 being amortized by the straight-line method          over periods ranging from 

F-10
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

 

15        to 25 years. The other intangible assets are being amortized over 5 to        20 years representing the future benefit of the intangible. 

           In        June 2001, the Financial Accounting Standards Board issued Statements        of Financial Accounting Standards No. 141, *Business Combinations*,        and No. 142, *Goodwill and Other Intangible Assets (FAS 142).*         The Company adopted these standards with its fiscal year beginning November        1, 2001. Under the new rules, goodwill (and intangible assets deemed to        have indefinite lives) is no longer amortized but is subject to annual        impairment tests in accordance with FAS 142 except in the year of adoption        where companies were required to evaluate impairment at the beginning        of the year and again at a recurring annual date.  The first step        in the impairment analysis is a screen for potential impairment and was        required to be completed within six months of adopting FAS 142.         The second step if required, measures the amount of impairment.         The Company completed step one of the initial impairment analysis and        the subsequent annual analysis during the second and fourth quarters of        2002. Additionally, this analysis was performed in the fourth quarter        of 2004 and 2003. The application of the requirements of this standard        did not result in an impairment charge.  Other intangible assets        will continue to be amortized over their useful lives.  Application        of the nonamortization provisions of the Statement resulted in an increase        in net income of $50,000 in 2002 or approximately $0.01 per share.

**Advertising        Costs**

           Advertising        costs are expensed as incurred. Advertising expense for the years ended        October 31, 2004, 2003 and 2002 approximated $641,000, $433,000 and $549,000.

**Income        Taxes**

           Provisions        for income taxes currently payable and deferred income taxes are based        on the liability method. Under this method, deferred tax assets and liabilities        are determined based on differences between financial reporting and tax        basis of assets and liabilities and are measured using the enacted tax        rates and laws that will be in effect when the differences are expected        to reverse. A valuation allowance is established to reduce deferred tax        assets if it is more likely than not that a deferred tax asset will not        be realized.

**Earnings        Per Share**

           Basic        earnings per share is computed by dividing net income by the weighted        average shares of common stock outstanding for the period and excludes        any dilutive effects of stock options. Diluted earnings per share is computed        by dividing net income by the weighted average shares of common stock        outstanding for the period plus the shares that would be outstanding assuming        the exercise of dilutive stock options using the treasury stock method.        The effect of dilutive stock options increased weighted average shares        outstanding by 96,000, 48,000 and 12,000 for the years ended October 31,        2004, 2003 and 2002.

F-11
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**Segment        Information**

           The        Company designates the internal organization that is used by management        for making operating decisions and assessing performance as the source        of the Company’s reportable segments.  

**Accounting        for Web Site Development Costs**

           Certain        external costs and internal payroll and payroll-related costs have been        capitalized during the application, development and implementation stages        of the Company’s web site.  The costs regarding the ongoing        operation and maintenance are expensed in the period incurred.  The        Company’s internet sales are based on a cooperative effort with        the Company’s direct sales force as an optional ordering alternative.

**Revenue        Recognition**

           Revenues        are recognized when products are shipped or ownership is transferred and        when services are rendered to customers.  The Company acts as a principal        party in sales transactions, assumes title to products and assumes the        risks and rewards of ownership including risk of loss for collection,        delivery or returns. The Company typically recognizes revenue for the        majority of its products upon shipment to the customer and transfer of        title. Under agreements with certain customers, custom forms may be stored        by the Company for future delivery. In these situations, the Company may        receive a logistics and warehouse management fee for the services provided.        In these cases, delivery and bill schedules are outlined with the customer        and product revenue is recognized when manufacturing is complete and the        product is received into the warehouse, title transfers to the customer,        the order is invoiced and there is reasonable assurance of collectibility.        Since the majority of products are customized, product returns are not        significant. Therefore, the Company records sales on a gross basis.         Shipping and handling costs are recorded as a component of cost of sales.

**Accounting        for Costs Associated with Exit or Disposal Activities**

**           **In July 2002, the FASB issued SFAS No. 146 “*Accounting for        Costs Associated with Exit or Disposal Activities*” (Statement        No. 146), which supercedes EITF No. 94-3, “Liability Recognition        for Certain Employment Termination Benefits and Other Costs to Exit an        Activity.”  Statement 146 requires companies to record liabilities        for costs associated with exit or disposal activities to be recognized        only when the liability is incurred instead of at the date of commitment        to an exit or disposal activity.  Adoption of this standard is effective        for exit or disposal activities that are initiated after December 31,        2002. The Company recognized costs for severance, lease termination and        travel of approximately $123,000 during the fourth quarter of 2003, under        the requirements of this standard, relating to the consolidation of the        Company’s U.S. Tag facility into the Company’s existing Huntington,        West Virginia location. During the second quarter of 2004 the Company        recognized costs associated with facility consolidations of approximately        $150,000 and personnel severance related costs of approximately $37,000.

F-12
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**Accounting        for Stock-Based Compensation**

           In        December 2004, the FASB issued SFAS No. 123R (revised 2004), *Share-Based        Payment*. This statement revises SFAS No. 123, *Accounting for Stock-Based        Compensation*, and requires companies to expense the value of employee        stock options and similar awards. The effective date of this standard        is interim and annual periods beginning after June 15, 2005. 

           The        Company has elected to follow the intrinsic value method in accounting        for its employee stock options. Accordingly, because the exercise price        of the Company's employee stock options equals the market price of the        underlying stock on the date of grant, no compensation expense is recognized.

           The        fair value of these options was estimated at the date of grant using a        Black-Scholes option pricing model with the following weighted-average        assumptions for 2004, 2003 and 2002 respectively: risk-free interest rates        of 4.03%, 4.30% and 3.91%; dividend yields of 4.21%, 4.80% and 8.03%;        volatility factors of the expected market price of the Company's common        stock of 54.0%, 48.6% and 45.4%; and a weighted-average expected life        of the option of 4 years.

           The        following pro forma information has been determined as if the Company        had accounted for its employee stock options under the fair value method.        For purposes of pro forma disclosures, the estimated fair value of the        options is expensed in the year granted since the options vest immediately.        The Company's pro forma information for the years ended October 31 are        as follows:
  **Year              Ended October 31**    **2004**  **2003**  **2002**          Net            Income as reported **$****                    749,698**  $   1,767,803  $  2,207,704 Deduct:            Total stock-based employee compensation expense            determined under the fair value method for all awards, net of            related tax effects **109,962**  62,250  38,704   Pro            Forma net income  **$****                   639,736**  $   1,705,553  $   2,169,000   Earnings            per share:      Basic,            as reported **$**
**0.08**
  $
 0.18
  $
 0.23
 Basic,            pro forma **$**
**0.07**
  $
 0.18
  $
 0.22
        Diluted,            as reported **$**
**0.08**
  $
 0.18
  $
 0.23
 Diluted,            pro forma **$**
**0.07**
  $
 0.17
  $
 0.22
            
F-13
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**Reclassifications**

           Certain        prior-year amounts have been reclassified to conform to the current year        financial statement presentation.

**2.        Inventories**

           Inventories        consisted of the following:
    **October              31,**   **2004**  2003    Printing:    Raw            materials **$****2,326,821**  $2,203,228                Work            in process **1,998,824**  2,022,420  Finished            goods **3,460,834**  3,680,184 Office            products and office furniture**3,483,035**  3,444,097       **$****11,269,514**  $11,349,929                  
**3.        Long-term Debt**

Long-term        debt consisted of the following:
 **October              31,**   **2004**   2003    Secured              term note payable to a bank, due in monthly principal and interest              installments approximating $89,950 with interest at the Wall Street              Journal prime rate maturing October 2008, collateralized by substantially              all assets of the Syscan Corporation and the Chapman Printing Charleston              division. **$****3,920,000**  $**—** Installment              notes payable to banks, due in monthly installments plus interest              at rates approximating the banks prime rate maturing in various              periods ranging from December 2004 - February 2010, collateralized              by equipment, vehicles, inventory and accounts receivable.  **3,576,234**  2,848,231 Capital              lease obligations, due in monthly installments totaling $19,116              through February 2005, with $8,322 due in monthly installments through              December 2005 at fixed rates of interest ranging from 7.0% to 7.75%.  **149,002**  359,027           **7,645,236**  3,207,258 Less            current portion  **1,688,429**  946,971        Long-term            debt, net of current portion **$****5,956,807**  $2,260,287                      
The        unsecured term note agreements contain restrictive financial covenants        requiring the Company to maintain certain financial ratios. The Company        was in compliance with these covenants at October 31, 2004.

F-14
 **Champion        Industries, Inc. and Subsidiaries**
        Notes to Consolidated Financial Statements (continued)

Maturities        of long-term debt for each of the next five years follow:
 **Notes****Capital** **Payable****Leases****Total**  **2005**              $1,555,911               $132,518               $1,688,429 **2006**              1,561,364               16,484               1,577,848 **2007**              1,580,206               -               1,580,206 **2008**              1,583,979               -               1,583,979 **2009**              300,328               -               300,328 **Thereafter**              914,446               -               914,446   **$7,496,234**              $149,002               $7,645,236  
 

           On        August 1, 2003 the Company obtained an unsecured revolving line of credit        with a bank for borrowings to a maximum of $10,000,000 with interest payable        monthly at the prime rate of interest.  The line of credit expires        in July 2006 and contains certain restrictive financial covenants. The        line of credit essentially replaced a previous $10,000,000 facility with        another bank. The Company had outstanding borrowings of approximately        $2.3 million and $1.7 million under this facility at October 31, 2004        and 2003 of which approximately $1.2 million was used to pay off an existing        term loan prior to maturity in 2003. 

           The        Company has an unsecured revolving line of credit with a bank for borrowings        to a maximum of $1,000,000 with interest payable monthly at the Wall Street        Journal prime rate.  The line of credit expires in October 2005 and        contains certain financial covenants.  There were no borrowings outstanding        under this facility at October 31, 2004 or 2003.

           The        prime rate, the base interest rate on the above loans, approximated 4.75%        and 4.00% at October 31, 2004 and 2003. Interest paid during the years        ended October 31, 2004, 2003 and 2002 approximated $320,000, $230,000and        $385,000. The Company capitalized interest of $19,000 and $33,000 during        fiscal 2004 and 2003 related to the purchase of a building in Baton Rouge,        Louisiana.

           The        Company’s non-cash activities for 2004, 2003 and 2002 included equipment        purchases of approximately $0, $96,000 and $288,000, which were financed        by a bank and the purchase in 2003 of a building in Baton Rouge, Louisiana        of which $1,440,000 of the purchase price was financed by a bank.

**4.        Employee Benefit Plans**

           The        Company had a Profit Sharing Plan that covered all eligible employees        and qualified as a Savings Plan under Section 401(k) of the Internal Revenue        Code. Effective 

F-15
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

 

January        1, 1998, the Profit Sharing Plan was merged into The Champion Industries,        Inc. 401(k) Plan (the “Plan”). The Plan covers all eligible        employees who satisfy the age and service requirements. Each participant        may elect to contribute up to 15% of annual compensation, and the Company        is obligated to contribute 100% of the participant’s contribution        not to exceed 2% of the participant’s annual compensation. The Company        may make discretionary contributions to the Plan. The Company’s        expense under these Plans was approximately $383,000, $365,000 and $346,000        for the years ended October 31, 2004, 2003 and 2002.

           The        Company's 1993 Stock Option Plan provides for the granting of both incentive        and non-qualified stock options to management personnel for up to 762,939        shares of the Company's common stock. In March 2004, the Company’s        2003 stock option plan was adopted to provide for the granting of both        incentive and non-qualified stock options to management personnel for        up to 475,000 shares of the Company’s common stock. The option price        per share for incentive stock options shall not be lower than the fair        market value of the common stock at the date of grant. The option price        per share for non-qualified stock options shall be at such price as the        Compensation Committee of the Board of Directors may determine at its        sole discretion. All options to date are incentive stock options. Exercise        prices for options outstanding as of October 31, 2004 ranged from $2.49        to $4.29. Options vest immediately and may be exercised within five years        from the date of grant. The weighted average remaining contractual life        of those options is 2.84 years.                   

F-16
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

           A        summary of the Company’s stock option activity and related information        for the years ended October 31 follows:
  **Weighted****Average****Exercise****Price**  **Weighted****Average****Exercise****Price**  **Weighted****Average****Exercise****Price**                **2004**  **2003**  **2002**           Outstanding-beginning            of year**312,000** **$3.25** 230,000  $5.41                130,000  $10.63                Granted**123,000** **4.29** 125,000  2.77  126,000  2.49  Exercised**(20,000****)** **2.80** -  -  -  -  Forfeited            or expired**(36,000****)** **6.26** (43,000) 13.42  (26,000) 17.38                Outstanding-end            of year**379,000** **3.33** 312,000  3.25  230,000  5.41                Weighted            average fair value of options granted during the year**$1.49**  $0.83                  $0.52                                   
A        summary of stock options outstanding and exercisable at October 31, 2004,        follows:
**Exercise****Number****Outstanding****Remaining****Price****Life**4.25               38,000              0.14              2.49               108,000              2.05              2.77               110,000              3.12              4.29               123,000              4.13              
 

           The        Company has a deferred compensation agreement with one employee of Blue        Ridge Printing Co., Inc. providing for payments totaling approximately        $500,000 over a ten year period after retirement. The Company had accrued        approximately $365,000 and $354,000 at October 31, 2004 and 2003 relating        to this agreement. The amount expensed for this agreement for the years        ended October 31, 2004, 2003 and 2002 approximated $11,000, $14,000 and        $18,000. To assist in funding the deferred compensation agreement, the        Company has invested in life insurance policies, which had a cash surrender        value of approximately $460,000 and $386,000 for years 2004 and 2003.

F-17
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**5.        Income Taxes**

Income        tax expense consisted of the following:
  **Year              Ended October 31,**  **2004** **2003** **2002**     Current            expense:      Federal **$****461,383** $1,270,574               $1,460,913                State **156,575**  321,285 350,069 Deferred            benefit  **(35,866****)**  (356,773) (245,091)              **$****582,092** $1,235,086               $1,565,891                          
Deferred        tax assets and liabilities are as follows:
   **October              31,**   **2004** 2003     Assets:         Allowance            for doubtful accounts **$****568,729**  $476,358                 Deferred            compensation **147,260**  142,973   Net            operating loss carryforward of acquired companies **611,750**  604,582   Accrued            vacation **355,574**  278,848   Other            accrued liabilities **186,858**  189,492   Other            assets **106,596**  89,240           Gross            deferred tax assets **1,976,767**  1,781,493  Liabilities:      Property            and equipment **3,537,653**  3,337,530   Intangible            assets **1,384,278**  -            Gross            deferred tax liability **4,921,931**  3,337,530                        Valuation allowance **(285,250****)** (285,250)         Net            deferred tax liabilities **$****3,230,414**  $1,841,287                       
F-18
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

           A        reconciliation of the statutory federal income tax rate to the Company’s        effective income tax rate is as follows:
**Year              Ended October 31,**  **2004**   **2003**   **2002**               Statutory            federal income tax rate  **34.0****%**  34.0%  34.0%State            taxes, net of federal benefit  **7.5**   7.0   6.1 Change            in valuation allowance  **-**   (7.8)  - Deferred            tax adjustments  **-**   6.1   (0.6)Selling            expenses  **5.7**   2.5   2.1 Cash            surrender value of life insurance accretion  **(1.3****)**  -   - Other  **(2.2****)**  (0.7)  (0.1) Effective            tax rate  **43.7****%**  41.1%  41.5% 
           Income        taxes paid during the years ended October 31, 2004, 2003 and 2002 approximated        $1,119,000, $1,758,000 and $659,000.

           The        Company has available for income tax purposes net operating loss carryforwards        from acquired companies of approximately $1,089,000, of which $157,000        expires in 2011, $899,000 in 2012 and $33,000 in 2013. The Company has        available for state income tax purposes net operating loss carryforwards        from acquired companies of approximately $2,992,000 of which $144,000        expires in 2012, $108,000 expires in 2013, $435,000 expires in 2014, $1,012,000        expires in 2015, $872,000 expires in 2016, $48,000 expires in 2018 and        $373,000 expires in 2019.  The Company established valuation allowances        against certain net operating loss carryforwards during 2003 the valuation        allowance decreased by $259,197 resulting from changes in the estimated        realizability of an acquired subsidiary’s deferred tax assets. There        was no change in the valuation allowance in 2004.

**6.        Related Party Transactions and Operating Lease Commitments**

           The        Company leases operating facilities from entities controlled by its Chief        Executive Officer, his family and affiliates as well as facilities controlled        by a Company vice president pursuant to the acquisition of Syscan (see        note 8). The original terms of these leases, which are accounted for as        operating leases, range from two to fifteen years.

A        summary of significant related party transactions follows:
**Year              Ended October 31,**  **2004**   **2003**   **2002**                     Rent            expense paid to affiliated entities for operating facilities  **$394,000**   $424,000                 $424,000               Sales            of office products, office furniture and printing services to affiliated            entities  **929,000**   590,000   803,000 
F-19
 **Champion        Industries, Inc. and Subsidiaries**
        Notes to Consolidated Financial Statements (continued)

           In        addition, the Company leases property and equipment from unrelated entities        under operating leases. Rent expense amounted to $862,000, $960,000 and        $881,000 for the years ended October 31, 2004, 2003 and 2002.

           Under        the terms and conditions of the above-mentioned leases, the Company pays        all taxes, assessments, maintenance, repairs or replacements, utilities        and insurance.

           Future        minimum rental commitments for all noncancelable operating leases including        related party commitments with initial terms of one year or more consisted        of the following at October 31, 2004:

2005

 $               1,399,647

2006

1,220,998

2007

945,183

2008

 701,474

2009

 253,340

Thereafter

-
  
$  4,520,642
 
           The        Company participates in a self-insurance program for employee health care        benefits with affiliates controlled by its Chief Executive Officer and        as such is responsible for paying claims of company participants as required        by the plan document. The Company is allocated costs primarily related        to the reinsurance premiums based on its proportionate share to provide        such benefits to its employees. The Company’s expense related to        this program for the years ended October 31, 2004, 2003 and 2002 was approximately        $3,197,000, $2,999,000 and $2,267,000.  

           In        the first quarter of 2002, the Company made a deposit to purchase a fractional        ownership in an aircraft from an entity controlled by its Chief Executive        Officer for approximately $1.2 million of which $875,000 had been paid        as of October 31, 2002. The Company had previously anticipated the transaction        to be completed during the fourth quarter of 2002.  The Company’s        Board of Directors further evaluated the transaction, and prior to its        completion determined that it would be in the Company’s best interests        to rescind the transaction. Therefore, the transaction has been terminated        and a full refund of the deposit has been made.

           During        2004, 2003 and 2002 the Company utilized this aircraft and reimbursed        the controlled entity for the use of the aircraft, fuel, air crew, ramp        fees and other expenses attendant to the Company’s use, in amounts        aggregating $95,000, $79,000 and $118,000.  The Company believes        that such amounts are at or below the market rate charged by third-party        commercial charter companies for similar aircraft.

F-20
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

           The        Company believes that the terms of its related party transactions are        no less favorable to the Company than could be obtained with an independent        third party.

**7.        Commitments and Contingencies**

           On        February 16, 2002, a jury verdict was rendered against the Company in        a civil action brought against the Company in state court in Jackson,        Mississippi. The plaintiff in this civil action asserted that the Company        and its Dallas Printing Company, Inc. subsidiary had engaged in unfair        competition and other wrongful acts in hiring certain of its employees.         The jury awarded the plaintiff $1,745,000 in actual damages and $750,000        in punitive damages.

           On        March 1, 2002, the plaintiff filed a motion for attorney’s fees        and costs in the amount of $889,401.  On July 16, 2002, the court        entered an order granting plaintiff $645,119 in attorney fees and expenses,        and ordered that interest on the amount of the jury award accrue from        February 22, 2002.

                   The Company appealed both the jury award and the attorney fee and expense        award.  

           The        Company was advised on February 3, 2004 that the Court of Appeals of the        State of Mississippi had reversed the aforementioned judgment and jury        verdict rendered against the Company and had remanded the case for new        trial. The plaintiff petitioned the appeals court for rehearing of its        ruling on February 17, 2004. The Company’s response was filed on        February 24, 2004. 

           On        June 22, 2004 the Company was advised that the Court of Appeals of the        State of Mississippi had upheld its February 3, 2004 reversal of the judgment        and jury verdict and its remand of the case for new trial and had denied        plaintiff’s petition for rehearing of that decision. Plaintiff filed        a petition for writ of certiorari with the Mississippi Supreme Court to        contest the ruling of the Court of Appeals on July 6, 2004. The Company        filed a response to such petition on July 27, 2004.

           The        Company was advised on September 16, 2004 that the Supreme Court of Mississippi        had upheld the Court of Appeals of the State of Mississippi’s February        3, 2004 reversal of the judgment and jury verdict rendered February 16,        2002 against the Company and had upheld the reversal and remand of the        case for new trial.

           The        effect of the appeals courts orders of February 3, 2004 and June 22, 2004        and the Mississippi Supreme Court’s denial of plaintiff’s        petition for certiorari is to negate the trial court’s award of        damages and attorneys fees previously granted against the Company, and        grant a new trial on plaintiff’s claims.

                   The Company is subject to the environmental laws and regulations of the        United States and the states in which it operates concerning emissions        into the air, discharges into the waterways and the generation, handling        and disposal of waste materials. The Company’s

F-21
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

 

 past expenditures relating        to environmental compliance have not had a material effect on the Company        and are included in normal operating expenses. These laws and regulations        are constantly evolving, and it is impossible to predict accurately the        effect they may have upon the capital expenditures, earnings, and competitive        position of the Company in the future. Based upon information currently        available, management believes that expenditures relating to environmental        compliance will not have a material impact on the financial position of        the Company.

                       The Company is subject to various claims and legal actions, other than        the claim discussed above, that arise in the ordinary course of business.         In the opinion of management, after consulting with legal counsel, the        Company believes that the ultimate resolution of these claims and legal        actions will not have a material effect on the consolidated financial        statements of the Company.

**8.        Acquisitions**

           On        September 7, 2004 the Company acquired all the issued and outstanding        capital stock of Syscan Corporation (“Syscan”), a West Virginia        corporation, for a cash price of $3,500,000 and a contingent purchase        price, dependent upon satisfaction of certain conditions, not to exceed        the amount of $1,500,000. The Company also purchased a building from an        entity controlled by Syscan’s sole shareholder for $117,000 concurrent        with the Syscan acquisition. After considering the cash received, the        acquisition of a building and acquisition costs the net assets acquired        totaled approximately $2,688,000. Syscan Corporation is a provider of        integrated business products, with a primary emphasis on office and data        products, printing, mailing and fulfillment services, and office furniture.        The acquisition was consummated based on significant identified synergies        which could be achieved due to a duplication of market territory. The        acquisition brought additional supply chain management and mailing expertise        to the Company and allowed Syscan to offer a broader array of printing        services to its existing customer base. 

           The        Williams Land Corporation has the option to put the 3000 Washington Street        building occupied by Syscan to the Company for a purchase price of $1.5        million and the Company has the option to purchase the building for $1.5        million at the conclusion of the five year lease term commencing September        1, 2009. This option may be exercised no later than 60 days prior to the        end of the lease and closing of said purchase cannot exceed 45 days from        the end of the lease.

           Two        months of operations of Syscan Corporation are included in the Company’s        Statement of Operations commencing concurrent with the acquisition.

F-22
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**Syscan              Acquisition**
  
Current              assets, net of cash received 

                    $1,846,000 

Property,              plant, and equipment

                         782,000 

Non-compete              agreement

                      1,000,000 

Customer              relationships

                      2,461,000

Other              assets

                         127,000
 
                Total assets acquired

                      6,216,000 

Current              liabilities

                     (1,343,000) 

Long-term              debt

                        (760,000)

Deferred              tax

                     (1,425,000)
 
                Total liabilities acquired

                     (3,528,000)
 
                Net assets acquired

                    $2,688,000 
 
           The        identifiable intangible assets of Syscan are being amortized on a straight-line        basis over a period of 7 years for the non-compete agreement and 20 years        for the customer relationships. The weighted average life of the intangible        assets at the acquisition date was approximately 16 years.

           On        May 13, 2004, the Company acquired certain assets of Cincinnati, Ohio        Westerman Print Company.

           On        July 1, 2003 the Company acquired certain assets of Pittsburgh based Integrated        Marketing Solutions, the direct sales division and distributorship of        Datatel Resources Corporation.

           On        June 18, 2003 the Company acquired certain assets of Contract Business        Interiors (CBI) of Wheeling, WV pursuant to acceptance by the U.S. Bankruptcy        Court for the Northern District of West Virginia. As a result of this        transaction the Company also assumed certain customer deposit liabilities        in the ordinary course of business.

           Pro        forma financial information and all disclosures required by FAS 141 and        FAS 142 related to these acquisitions has not been presented because such        information would not be materially different from amounts reported herein        or is not significant.

           All        of the above transactions have been accounted for using the purchase method        of accounting.

**9.        Industry Segment Information**

           The        Company operates principally in two industry segments organized on the        basis of product lines: the production, printing and sale, principally        to commercial customers, of printed materials (including brochures, pamphlets,        reports, tags, continuous and other

F-23
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

 

        forms); and the sale of office products and office furniture including        interior design services. The Company employs approximately 830 people,        of whom 78 or approximately 9% are covered by a collective bargaining        agreement, which expires on May 31, 2006. 

F-24
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

The        table below presents information about reported segments for the years        ended October 31:
    **Office              Products**    **2004****Printing**   **&              Furniture**   **Total**  **Revenues****$****107,696,605** **$****34,919,102** **$****142,615,707****Elimination            of intersegment revenue****(12,372,291****)** **(5,841,844****)** **(18,214,135****)** **Consolidated            revenues****$****95,324,314** **$****29,077,258** **$****124,401,572** **Operating            income****632,232** **705,887** **1,338,119****Depreciation            & amortization****4,247,164** **142,594** **4,389,758****Capital            expenditures****4,912,115** **61,719** **4,973,834****Identifiable            assets****54,378,626** **9,771,258** **64,149,884****Goodwill****1,774,344** **286,442** **2,060,786**        **Office              Products**    **2003****Printing** **&              Furniture**   **Total** Revenues$106,540,961               $30,771,361               $137,312,322              Elimination            of intersegment revenue(10,004,360) (5,125,330) (15,129,690) Consolidated            revenues$96,536,601               $25,646,031               $122,182,632               Operating            income (loss)3,262,418 (106,202) 3,156,216Depreciation            & amortization4,145,286 143,121 4,288,407Capital            expenditures4,572,890 126,233 4,699,123Identifiable            assets48,387,601 10,081,234 58,468,835Goodwill1,643,530 286,442 1,929,972       **Office              Products** **2002****Printing****&              Furniture****Total** Revenues$104,767,231               $31,529,434               $136,296,665              Elimination            of intersegment revenue(9,572,943) (3,839,813) (13,412,756) Consolidated            revenues$95,194,288               $27,689,621               $122,883,909               Operating            income 3,955,083 117,509 4,072,592Depreciation            & amortization4,057,772 124,481 4,182,253Capital            expenditures1,994,255 178,582 2,172,837Identifiable            assets49,100,223 10,407,280 59,507,503Goodwill1,439,499 286,442 1,725,941
F-25
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

           A        reconciliation of total segment revenue, assets and operating income to        consolidated income before income taxes for the years ended October 31,        2004, 2003 and 2002 is as follows: 
                 **2004**** ****2003**** ****2002**     Revenues:      ** **      Total                segment revenues **$****142,615,707**  $137,312,322  $136,296,665  Elimination                of intersegment revenue ** ****(18,214,135****)**  (15,129,690)  (13,412,756)  ** **        Consolidated                revenue **$****124,401,572**  $122,182,632  $122,883,909   ** **       Operating              income: ** **** **   ** **      Total              segment operating income  **$****1,338,119**  $3,156,216  $4,072,592  Interest                income ** ****6,663**   3,899   14,376  Interest                expense ** ****(300,742****)**  (167,442)  (386,699) Other                income ** ****287,750**   10,216   73,326   ** **       Consolidated              income  before income taxes **$****1,331,790**  $3,002,889  $3,773,595   ** **       Identifiable                assets: ** **** **   ** **      Total                segment identifiable assets **$****64,149,884**  $58,468,835  $59,507,503  Elimination                of intersegment assets ** ****—**   **—**   —   ** **        Total                consolidated assets **$****64,149,884**  $58,468,835  $59,507,503   ** **       
**10.** **Accounting for Costs Associated with Exit or Disposal Activities**

           In        August 2003, the Company relocated its U.S. Tag division from Baltimore,        Maryland to Huntington, West Virginia. As a result of the Company’s        decision to relocate this division the Company incurred lease termination        costs of $63,000 which will be paid out on a monthly basis over the term        of the lease (at a rate of approximately $3,333 per month for 19 months        as of October 31, 2003), $45,000 in severance and termination benefits        which were paid during the fourth quarter of 2003 and travel related costs        of approximately $15,000 which were incurred during the fourth quarter        of 2003. As a result of the U.S. Tag relocation 19 positions were eliminated.        The Company anticipates only nominal costs related to the plant relocation        to occur in the future. These costs will occur over the remaining lease        term and include utility and security costs. 

           During        the second quarter of 2004, the Company incurred plant consolidation and        facility relocation costs related to the closure of the Blue Ridge Printing        Knoxville plant and consolidation into the Blue Ridge Printing Asheville        plant, and the facility consolidations in Baton Rouge related to Bourque,        Transdata and Diez. The facility consolidation and relocation costs approximated        $150,000 and the personnel severance related costs approximated $37,000.        

F-26
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

           The        costs associated with the aforementioned relocation of U.S. Tag and the        Blue Ridge and Baton Rouge consolidations were reflected in the consolidated        statements of operations statement in the category where the expenses        historically have been classified and are part of the printing segment.

**11.        Fair Value of Financial Instruments**

           The        carrying amount reported in the balance sheet for cash and cash equivalents        approximates its fair value. The fair value of long-term debt was estimated        using discounted cash flows and it approximates its carrying value.

**12.        Acquired Intangible Assets and Goodwill**
 
**2004**
 
**2003**
     
**Gross              Carrying Amount**
   **Accumulated              Amortization**   
**Gross              Carrying Amount**
   **Accumulated              Amortization**  
Amortizable              

               intangible assets

               Non-compete agreement

 $              1,000,000 

 $                   23,810 

 $                            -   

 $                            -   

               Customer relationships 

                 2,460,696 

                      23,631 

                               - 

                               - 

               Other

                    467,621 

                      68,825 

                    196,274 

                      11,856 
   
                 3,928,317 

                    116,266 

                    196,274 

                      11,856 
 
Unamortizable

               intangible assets

               Goodwill

                 2,568,064 

                    507,278 

                 2,437,250 

                    507,278 
   
               Total goodwill and 

                other intangibles

 $              6,496,381 

 $                 623,544 

 $              2,633,524 

 $                 519,134 
  
F-27
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)
           Amortization      expense for the years ended October 31, 2004, 2003 and 2002 was $104,000      and $12,000 and $0 respectively. Estimated amortization expense for each      of the following years is:
2005
  $
341,916

2006
 
341,916

2007
 
341,916

2008
 
              336,810

2009
 
289,488

Thereafter
 
2,160,005
     $
3,812,051
  
           The        changes in the carrying amount of goodwill for the years ended October        31, 2004 and 2003 were:
 
**2004**
 
**2003**
 
Balance              as of November 1, 2003 and 2002   

                              $ 1,929,972 

                        $ 1,725,941 

               Goodwill acquired during the year

               Additions

                                    130,814 

                              204,031              

               Impairment losses

                                               - 

                               - 

               Goodwill written off related to 

               sales of businesses

                                               - 

                               - 
  
Balance              as of October 31, 2004 and 2003

                              $ 2,060,786 

                       $ 1,929,972 
  
           The        changes in the carrying amounts of goodwill and other intangibles attribute        to each segment at October 31, 2004 and 2003 are as follows:
**GOODWILL**                 **Amortization**   **31-Oct-03****Expense****Other****31-Oct-04**               Printing$1,643,530              $              - $130,814              $1,774,344                          Office Products & furniture 286,442              -  -286,442              Total$1,929,972              $              - $130,814              $2,060,786               
F-28
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)
      **31-Oct-02****Amortization****Expense****Other****31-Oct-03**              Printing $1,439,499              $              - $204,031              $1,643,530                           Office Products & furniture 286,442              -               - 286,442               Total $1,725,941              $              - $204,031              $1,929,972                                                            **OTHER            INTANGIBLES** **Amortization**   **31-Oct-03****Expense****Other****31-Oct-04**               Printing $128,250              $60,607              $1,430,680              $1,498,323                           Office Products & furniture 56,16843,8032,301,3632,313,728               Total $184,418              $104,410              $3,732,043              $3,812,051                                   **Amortization**   **31-Oct-02****Expense****Other****31-Oct-03**               Printing $              - $6,750              $135,000              $128,250                           Office Products & furniture               - 5,10661,27456,168               Total $              - $11,856              $196,274              $184,418                 
**13.        Certain Significant Estimates**

**           **Our estimates that influence the financial statements are normally        based on knowledge and experience about past and current events and assumptions        about future events. The following estimates affecting the financial statements        are particularly sensitive because of their significance and it is at        least reasonably possible that a change in these estimates will occur        in the near term. 

**Goodwill        and Identifiable Assets**

                   We evaluate the recoverability of the goodwill of each of our reporting        units as required under SFAS No. 142 by comparing the fair value of each        reporting unit with its carrying value. The fair values of our reporting        units are determined using a combination of a discounted cash flow analysis        and market multiples based on historical and projected financial information.        We apply our best judgment when assessing the reasonableness of the financial        projections used to determine the fair value of each reporting unit.

F-29
 
**Champion        Industries, Inc. and Subsidiaries**

        Notes to Consolidated Financial Statements (continued)

**Allowance        for Doubtful Accounts**

*           *The Company encounters risks associated with sales and the collection        of the associated accounts receivable.  As such, the Company records        a monthly provision for accounts receivable that are considered to be        uncollectible.  In order to calculate the appropriate monthly provision,        the Company primarily utilizes a historical rate of accounts receivables        written off as a percentage of total revenue.  This historical rate        is applied to the current revenues on a monthly basis.  The historical        rate is updated periodically based on events that may change the rate        such as a significant increase or decrease in collection performance and        timing of payments as well as the calculated total exposure in relation        to the allowance.  Periodically, the Company compares the identified        credit risks with the allowance that has been established using historical        experience and adjusts the allowance accordingly. The underlying assumptions        used for the allowance can change from period to period and could potentially        cause a material impact to the income statement and working capital.

F-30
 
**Champion Industries, Inc. and Subsidiaries**

Notes to Consolidated Financial Statements (continued)

**14. Earnings Per Share**

**           **Earnings per share (EPS) were computed as follows:
      
**Weighted**
   
**Per**
       
**Average**
   
**Share**
    
**Income**
  
**Shares**
   
**Amount**
     
**Year Ended October 31, 2004**
    
Net Income
 $
    749,698
               
Basic Earnings per Share
    
 Income available to common shareholders
 
                      749,698

   9,729,000
  $
         0.08
 
Effect of Dilutive Securities
    
 Stock options
 
       96,000
   
Diluted Earnings Per Share
    
 Income available to common shareholders
    
  and assumed conversions
 $
    749,698

   9,825,000 
  $
         0.08
                
**Year Ended October 31, 2003**
    
Net Income
 $
 1,767,803
               
Basic Earnings per Share
    
 Income available to common shareholders
 
                   1,767,803

   9,714,000 
  $
         0.18
 
Effect of Dilutive Securities
    
 Stock options
 
       47,000 
   
Diluted Earnings Per Share
    
 Income available to common shareholders
    
  and assumed conversions
 $
 1,767,803

   9,761,000 
  $
         0.18 
     
**Year Ended October 31, 2002**
    
Net Income
 $
 2,207,704
               
Basic Earnings per Share
    
 Income available to common shareholders
 
                   2,207,704

   9,714,000 
  $
         0.23 
 
Effect of Dilutive Securities
    
 Stock options
 
     12,000 
   
Diluted Earnings Per Share
    
 Income available to common shareholders
    
  and assumed conversions
 $
 2,207,704

   9,726,000 
  $
         0.23 
    
F-31
 
**Champion Industries, Inc. and Subsidiaries**

Notes to Consolidated Financial Statements (continued)

**15. Quarterly Results of Operations (unaudited)**

The following is a summary of the quarterly results of operations for the years ended October 31, 2004 and 2003.
                   **First Quarter****Second Quarter****Third Quarter****Fourth Quarter**              **Revenues** **2004**$ 29,314,000$ 30,501,000$  30,098,000$  34,489,000 2003$ 28,619,000$ 29,329,000$  30,599,000$  33,636,000**Gross Profit** **2004**$ 7,966,000$ 8,888,000$  8,334,000$  9,315,000 2003$ 7,918,000$ 8,492,000$  8,217,000$  9,751,000**Net income** **2004**$ 14,000$ 161,000$  77,000$  498,000 2003$ 254,000$ 517,000$ 253,000$  744,000**Earnings  per share**Basic **2004**$ 0.00$ 0.02 $  0.01$  0.05 2003$ 0.03$ 0.05$ 0.03$  0.08Diluted **2004**$ 0.00 $ 0.02 $0.01$  0.05 2003$ 0.03$  0.05$  0.03$  0.08**Weighted Average Shares Outstanding**Basic **2004**9,717,0009,731,0009,734,0009,734,000 20039,714,0009,714,0009,714,0009,714,000Diluted **2004**9,826,0009,864,0009,832,0009,802,000 20039,730,0009,750,0009,756,0009,810,000
F-32
 
**Champion Industries, Inc. and Subsidiaries**

Schedule II

Valuation and Qualifying Accounts

Years Ended October 31, 2004, 2003 and 2002
   
**Balance at Beginning of period**
   **Balances of acquired Companies**   
**Additions charged to costs and Expenses**
      
**Deductions (1)**
   
**Balance at end of period**     
**Description**
 
**2004**
 
Allowance for doubtful accounts
 **$**
**1,190,996**
**$**
**207,250**
**$**
**  487,550**
**$**
**    (463,874**
**)****$**
** 1,421,922**

2003
 
Allowance for doubtful accounts
 $
1,397,491
**$**
**         **—
$
  336,291
$
    (542,786
)$
 1,190,996

2002
 
Allowance for doubtful accounts
 $
1,432,304
**$**
**         **—
$
  363,328
$
    (398,141
)$
 1,397,491

(1)   Uncollectible accounts written off, net of recoveries.

F-33 |
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